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Exhibit 20A-1  Policy Alternatives in Panel (A) of Exhibit 20A-1

question 219

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Exhibit 20A-1  Policy Alternatives Exhibit 20A-1  Policy Alternatives   In Panel (a)  of Exhibit 20A-1, the economy is initially in short-run equilibrium at real GDP level Y<sub>1</sub> and price level P<sub>2</sub>. Classical theory argues: A)  the federal government must shift AD<sub>1</sub> to AD<sub>2</sub> as shown in Panel (b) . B)  the federal government must shift SRAS<sub>1</sub> to SRAS<sub>2</sub>. C)  that SRAS<sub>1</sub> will shift to SRAS<sub>2</sub> without government intervention. D)  that AD will shift rightward without government intervention. In Panel (a) of Exhibit 20A-1, the economy is initially in short-run equilibrium at real GDP level Y1 and price level P2. Classical theory argues:


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