Refer to the Following Figure to Answer the Questions That

question 73

Multiple Choice

Refer to the following figure to answer the questions that follow.

-Which of the following would be the theoretical outcome of contractionary fiscal policy in the following aggregate demand-aggregate supply model,where LRAS is long-run aggregate supply and SRAS is short-run aggregate supply?

• A) The aggregate demand (A
• D) curve would shift from AD₁ to AD₂.
• B) The short-run aggregate supply (SRA
• S) curve would shift from SRAS2 to SRAS1.
• C) The SRAS curve would shift from SRAS1 to SRAS2.
• D) The AD curve would shift from AD₁ to AD₂ at the same time that the SRAS curve would shift from SRAS1 to SRAS2.
• E) The AD curve would shift from AD₂ to AD₁.

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