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Now say that the Fed pursues expansionary monetary policy

Now say that the Fed pursues expansionary monetary policy -...

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Now say that the Fed pursues expansionary monetary policy. In this case, the aggregate  demand curve shifts to the right from aggregate demand curve 1 to aggregate demand  curve 2. The intersection of short- run aggregate supply curve 1 and aggregate demand  curve 2 has now shifted to the upper right from point A to point B. At point B, both output  and the price level have increased. This is the new short-run equilibrium.  But, as we move to the long run, the expected price level comes into line with the actual  price level as firms, producers, and workers adjust their expectations. When this occurs,  the short-run aggregate supply curve shifts along the aggregate demand curve until the  long-run aggregate supply curve, the short-run aggregate supply curve, and the  aggregate demand curve all intersect. This is represented by point C and is the new 
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