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Refer to the Graph Below

question 67

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Refer to the graph below.Assume that the economy is in initial equilibrium where AS1 intersects AD1.Then a supply shock occurs that shifts AS1 to AS2.If the government counters with an expansionary fiscal policy that shifts AD1 to AD2,then it is most likely that: Refer to the graph below.Assume that the economy is in initial equilibrium where AS<sub>1</sub> intersects AD<sub>1</sub>.Then a supply shock occurs that shifts AS<sub>1</sub> to AS<sub>2</sub>.If the government counters with an expansionary fiscal policy that shifts AD<sub>1</sub> to AD<sub>2</sub>,then it is most likely that:   A)  AD<sub>2</sub> will shift to AD<sub>1</sub>. B)  AS<sub>2</sub> will shift to AS<sub>1</sub>. C)  AS<sub>2</sub> will shift to AS<sub>3</sub>. D)  AS<sub>2</sub> will shift to AS<sub>3</sub> and AD<sub>2</sub> will shift to AD<sub>1</sub>.


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