For the next three questions, consider this scenario: The Fed does easy money po

ID: 1106016 • Letter: F

Question

For the next three questions, consider this scenario: The Fed does easy money policy. As a result,

a)LM shifts left; AD shifts left

b)LM shifts right; AD shifts left

c)LM shifts left; AD shifts right

d)LM shifts right; AD shifts right

As a result, the price level will _______ and income will ______ in the short run.

a) rise; remain unchanged

b)remain unchanged; rise

c) fall; remain unchanged

d)remain unchanged; fall

e)None of the listed options is correct.

a) rise; rise

1) Expansionary monetary policy shifts the LM rightward and interest rate goes down which increases AD and shift the AD right

2)As a result price and income both will increase in short run