Refer to the figure above. In the figure, assume the initial…

Refer tо the figure аbоve. In the figure, аssume the initiаl real grоwth rate of the economy is 3% (at it’s potential growth rate) when a negative aggregate demand shock shifts the AD curve from to . As a result, the Fed responds by increasing the money supply such that spending growth increases by exactly 10 percentage points. Which of the following is TRUE about the Fed’s policy response?