Use the Following to Answer Questions

question 1

Multiple Choice

Use the following to answer questions:
-(Figure: Classical Model of the Price Level) Refer to Figure: Classical Model of the Price Level. If the central bank increases the money supply such that aggregate demand shifts from AD₁ to AD₂, according to this classical model, the price level will:

• A) not change.
• B) increase from P₁ to P₂.
• C) increase from P₁ to P₃.
• D) decrease from P₁ to P₂.