Quantitative Reasoning Prep: Contractionary Monetary Policy Assume that the economy is currently in short run equilibrium but experiencing an inflationary gap. 1. Graphically illustrate the problem 2. Identify the combination of monetary policies that the Federal Reserve would pursue to correct problem 3. Graphically illustrate and explain how these monetary policies affect (1) the Market for Reserves, (2) the Market for M1. and (3) the Market for Real Goods and Services (AD- AS) 4. Make sure that you identify the Fed's goals/objectives and also graphically illustrate the solution