Task 7: Money and Monetary Policy Refer to the figure below and answer the quest

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Task 7: Money and Monetary Policy Refer to the figure below and answer the questions 1 and 2 Price level LAAS ADe AD 1080 1080 Real GDP billilions of dollars) 1. Given tha t the economy has moved from A to B what would be the appropriate monetary policy to achieve potential GDP and why? If monetary policy is successful at moving the economy from point B to equilibrium at potential GDP, what happens to unemployment and consumer confidence? 2. 3. Briefly discuss the effect of a fall in the cash rate on consumption.

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