In response to an inflationary gap, the Fed decides to sell securities, causing interest rates to ____________ (fall/increase/be unaffected).
As a result of Fed action, aggregate __________ (supply/demand) shifts _____________ (leftward/rightward) in the short run in response.
Unemployment _____________ (increases/decreases/stays the same) due to the policy of the Fed and inflation _______________ (increases/decreases/stays the same).
In the long run output is ___________ (lower/higher/unchanged) due to fed policy versus letting the economy return to equilibrium on its own.
On the other hand, If the Fed choose to do nothing, in the long run, aggregate _____________ (supply/demand) would have shifted to the _________ (left/right). Output in the long run if the Fed does NOT intervene would be ___________ (higher/lower/unchanged) and the price level would be ___________ (higher/lower/unchanged) than if the Fed did intervene.
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