"The Fed has cut its target for the federal funds rate G, the rate banks pay to borrow from each other overnight, by a total of 1.5 percentage points since March 3 , bringing it down to a range of 0 percent to 0.25 percent. The federal funds rate is a benchmark for other short-term rates, and also affects longer-term rates, so this move is aimed at lowering the cost of borrowing on mortgages, auto loans, home equity loans, and other loans, but it will also reduce the interest income that savers get." (Link to more information on what the Fed is doing in response to the COVID19 crisis. ) Suppose that the COVID shock caused a reduction in AS that was larger than the reduction in AD. What does the AD/AS model predict regarding the impacts of the expansionary monetary policy on the price and output levels? Use the AD/AS diagram to see how the economy moves from the SR equilibrium, E1, to new LR equilibrium, E2: The expansionary monetary policy shifts to the . The new equilibrium Y is expected to rise and return to its potential output level while the equilibrium P is expected to "The Fed has cut its target for the federal funds rate G, the rate banks pay to borrow from each other overnight, by a total of 1.5 percentage points since March 3 , bringing it down to a range of 0 percent to 0.25 percent. The federal funds rate is a benchmark for other short-term rates, and also affects longer-term rates, so this move is aimed at lowering the cost of borrowing on mortgages, auto loans, home equity loans, and other loans, but it will also reduce the interest income that savers get." (Link to more information on what the Fed is doing in response to the COVID19 crisis. ) Suppose that the COVID shock caused a reduction in AS that was larger than the reduction in AD. What does the AD/AS model predict regarding the impacts of the expansionary monetary policy on the price and output levels? Use the AD/AS diagram to see how the economy moves from the SR equilibrium, E1, to new LR equilibrium, E2: The expansionary monetary policy shifts to the . The new equilibrium Y is expected to rise and return to its potential output level while the equilibrium P is expected to