AS A -AD3 C AD2 AD, Real GDP Refer to the above diagram. The economy is at equilibrium at point C. What fiscal policy would increase real GDP? Increase aggregate demand from AD2 to AD, by decreasing taxes. Decrease aggregate demand from AD2 to AD3 by increasing taxes. Increase aggregate demand from AD1 to AD2 by increasing government spending. Make no change because the economy is at or near its full-employment level of real output. Price Level

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