Fill the blanks.

1) A / B

2) Beyond / Below

3) Expansionary / Contractionary

4) Right / Left

5) AD2 to AD1 / AD1 to AD2

6) Decreasing / Increasing

7) B / A

Use a graph to show the effects of a monetary policy to reduce ination and move an economy back to potential real GDP. Explain what happens to aggregate demand, real GDP. and the price level. Price level Real EDP Answer: If the economy is experiencing ination, it is currently at point 1 . 2 potential real GDRAII n} 3 monetary policy will shift the aggregate demand curve to the 4 from 5 , 6 real HI GDP and the price level until it reaches potential real GDP at point