The economy in 2016 starts in equilibrium at point A, with real and potential GDP equal to $1.75trillion. Between 2016 and 2017, potential GDP increased to $1.93trillion as the long?run aggregate supply curve shifted right to LRAS2. Economists at the Bank of Canada (BOC) project that real GDP for 2017 will be $10.05trillion.

Why might the BOC want to engage in contractionary monetary policy in thisinstance?

-Aggregate demand is not growing fast enough to meet potentialGDP.

-The BOC would not want to intervene since aggregate demand isrising.

-The changes in the price levels indicate that deflation isoccurring.

-Price levels may be increasing too quickly, leading to highinflation.

Adjust the graph to show what would happen if the central bank conducted a successful contractionary monetarypolicy.