Referring to the diagram above, which of the following statements is true? Monetary policy that increases the money supply also increases the level of potential GDP. Tight monetary policy expands the economy by increasing the level of potential GDP. This contractionary monetary policy shift will also affect exchange rates for both imports and exports. This expansionary monetary policy shift also includes the effect of exchange rates on exports and imports.

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20
Referring to the diagram above, which of the
following statements is true?
Monetary policy that increases the money
supply also increases the level of potential
GDP.
Tight monetary policy expands the economy
by increasing the level of potential GDP.
This contractionary monetary policy shift will
also affect exchange rates for both imports
and exports.
This expansionary monetary policy shift also
includes the effect of exchange rates on
exports and imports.
Transcribed Image Text:Referring to the diagram above, which of the following statements is true? Monetary policy that increases the money supply also increases the level of potential GDP. Tight monetary policy expands the economy by increasing the level of potential GDP. This contractionary monetary policy shift will also affect exchange rates for both imports and exports. This expansionary monetary policy shift also includes the effect of exchange rates on exports and imports.
Interest rate
i₁
İ₂
Supply
Demand
Supply
when
monetary
policy
enhances
the
supply level
Quantity
of Money
Transcribed Image Text:Interest rate i₁ İ₂ Supply Demand Supply when monetary policy enhances the supply level Quantity of Money
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