how-might-contractionary-monetary-policy-interact-with-the-dynamic-ad-as-model-t

Question

How might contractionary monetary policy interact with the dynamic AD-AS model to influence economic outcomes?

Accepted Answer

It shifts the aggregate demand curve to the left, decreasing GDP and potentially decreasing price levels.

Answer

It shifts the aggregate demand curve to the right, increasing GDP.

Answer

It shifts the long-run aggregate supply curve to the right, increasing GDP.

Answer

It has no effect on aggregate demand or supply.