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LRAS ( year ) The graph depicts a dynamic aggregate demand ( AD ) and aggregate supply ( AS ) model of the economy. Suppose
LRAS year The graph depicts a dynamic aggregate demand AD and aggregate supply AS model of the economy. Suppose that in the economy is in macroeconomic equilibrium, with GDP at GDP year The Fed projects that in the aggregate demand curve will be AD year that potential real GDP will be $ trillion GDP year and that actual real GDP will be $ trillion. LRAS year SRAS year SRAS year Year By how much does projected potential real GDP exceed actual real GDP in Price level AD year AD year difference: trillion GDP year GDP year Real GDP trillions of What could the Federal Reserve do to help the economy reach potential real GDP in Conduct contractionary monetary policy to increase interest rates. It cannot aid the economy Conduct expansionary monetary policy to decrease interest rates
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