Use the Following to Answer Questions

question 124

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, real GDP will:

• A) not change.
• B) increase from Y_E to Y₁.
• C) increase from Y₁ to Y_E.
• D) establish a new potential output.

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