Use the Following to Answer Questions

question 23

Multiple Choice

Use the following to answer questions :
Figure: Classical Model of the Price Level
-(Figure: Classical Model of the Price Level) Look at the 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 SRAS will:

• A)not change, since in the classical model the SRAS and LRAS are both vertical at potential output.
• B)decrease from SRAS₁ to SRAS₂.
• C)increase from SRAS₂ to SRAS₁.
• D)increase from SRAS₁ to SRAS₂.

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