(Figure: Monetary Policy I) Use Figure: Monetary Policy I. If the economy is initially in equilibrium at E1, and the central bank buys Treasury bills, shift to a(n) gap. Aggregate LRAS price level, P SRAS P 2 E 2 P1 E1 AD 2 AD 1 Y1 YE = potential Real GDP output O AD2 will; AD1, causing; recessionary OAD2 will; right, causing; inflationary AD] will; left, increasing; recessionary O AD] will; AD2, closing; recessionary