1. When the economy is significantly below the required potential, there will be a right shift of the AD (aggregate demand) curve. In this scenario, the expansionary monetary policy will increase the price levels and also the productivity.
2. When the economy is above the potential output level, then the expansionary monetary policy will only create high inflation. This is because of the high output due to LRAS (long run aggregate supply) and so, only the prices will increase causing an inflation.
