Use the "Monetary Policy I" Figure 31-5. If the money and the central bank chooses to buy bonds, then: AD2 will shift to the right, creating an inflationary gap. AD2 may shift to AD₁, creating a recessionary gap. AD₁ may shift to AD2, closing an existing recessionary gap... AD₁ will shift to the left, increasing an existing recessionam AD2 will shift to the right, creating a recessionary gap.

Use the "Monetary Policy I" Figure 31-5. If the money and the central bank chooses to buy bonds, then: AD2 will shift to the right, creating an inflationary gap. AD2 may shift to AD₁, creating a recessionary gap. AD₁ may shift to AD2, closing an existing recessionary gap... AD₁ will shift to the left, increasing an existing recessionam AD2 will shift to the right, creating a recessionary gap.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, And Sources Of Business Cycles

Section: Chapter Questions

Problem 8E

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