### Diagram ExplanationThe graph represents the Aggregate Demand (AD) and Short-Run Aggregate Supply (SRAS) model, illustrating an increase in aggregate demand. - **Axes**: The vertical axis represents the price level, while the horizontal axis represents real GDP.- **Curves**: - **SRAS**: Short-run aggregate supply curve, slopes upwards. - **AD₁ to AD₂**: Shift in the aggregate demand curve from AD₁ to AD₂ indicates an increase in aggregate demand.- **Price Levels**: - **PL₁** to **PL₂** illustrates an increase in the price level due to the shift in aggregate demand.- **Real GDP**: - The shift from Y₁ to Y₂ shows an increase in real GDP.### Text Content"The Aggregate Demand Model shows an increase in Aggregate Demand or GDP. Which type of Fiscal Policy **was used to cause this change** and why?"#### Multiple Choice Options:- ○ Expansionary Policy to raise GDP and lower the unemployment rate- ○ Expansionary Policy to raise GDP and lower Inflation- ○ Contractionary Policy to decrease GDP and lower the unemployment rate- ○ Contractionary Policy to increase GDP and Increase InflationThe diagram and question test the understanding of fiscal policy impacts on aggregate demand and the broader economy.

In the given model Aggregate Demand is increasing. In an Expansionary Fiscal Policy, AD increases…

SRAS PL2 PL AD, AD Y, Y2 REAL GDP he Aggregate Demand Model shows an increase in ggregate Demand or GDP, Which type of Fiscal Policy was used to cause this change and why? Expansionary Policy to raise GDP and lower the unemployment rate Expansionary Policy to raise GDP and lower Inflation Contractionary Policy to decrease GDP and lower the unemployment rate Contractionary Policy to increase GDP and Increase Inflation PRICE LEVEL

SRAS PL2 PL AD, AD Y, Y2 REAL GDP he Aggregate Demand Model shows an increase in ggregate Demand or GDP, Which type of Fiscal Policy was used to cause this change and why? Expansionary Policy to raise GDP and lower the unemployment rate Expansionary Policy to raise GDP and lower Inflation Contractionary Policy to decrease GDP and lower the unemployment rate Contractionary Policy to increase GDP and Increase Inflation PRICE LEVEL

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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