AD increases faster than LRAS – causing inflation.AD increases...

AD increases faster than LRAS – causing inflation.

AD increases faster than LRAS – causing inflation.

So, what can be done here? Well, the solution is to move the AD2 (Aggregate demand) down by increasing interest rates. Bytheway, central banks do not target the money supply.

"How does the AD–AS model explain inflation and unemployment? Inflation in the AD–AS model is typically a result of demand-pull factors (when AD exceeds AS) or cost-push factors (when SRAS shifts leftward, reducing output and increasing prices). Unemployment can be analyzed through changes in both AD and AS; for example, a leftward shift in AD can lead to higher unemployment due to lower demand for labor. The AD–AS model’s flexibility and comprehensiveness make it a vital tool in the analysis of macroeconomic policies and dynamics, offering insights into the complex interactions between demand, supply, and policy interventions in an economy."

Cash Rate Target Overview | RBA

AD–AS model - Wikipedia