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: AS3AS₂AS1 Price Level am an a 0 AD₂ AD₁ Q3 Q, Q₁ Real GDP

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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:
Price Level
ama a
0
AS₂
Multiple Choice
23AS₂AS₁
AD ₂
AD₁
Q3 Q Q Real GDP
AS2 will shift to AS₁.
AS2 will shift to AS3 and AD2 will shift to AD1.
AS2 will shift to AS3.
Transcribed Image Text: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: Price Level ama a 0 AS₂ Multiple Choice 23AS₂AS₁ AD ₂ AD₁ Q3 Q Q Real GDP AS2 will shift to AS₁. AS2 will shift to AS3 and AD2 will shift to AD1. AS2 will shift to AS3.
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