The short-run effect on output and the price level of the Fed pursuing expansionary monetary policy is that they both rise - working with the demand curve, a shift to the right, and both go up.
In the short run, a firm's output, wages, and prices do not always have complete freedom to change in order to accomplish a goal. Since there are no fixed costs in the long run, a firm's production components can find equilibrium. A company's production outputs can be coordinated to generate profit for the business.
Reduced reserve requirements for banks, increased purchases of government assets, and lower interest rates are the three tools the Federal Reserve uses to conduct an expansionary monetary policy. The goal of expansionary monetary policy is to make it simpler for people and businesses to borrow money and spend it, both of which help to stimulate the economy.
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