Multiple Choice
Which of the following would be the theoretical outcome of contractionary fiscal policy in the following aggregate demand-aggregate supply model,where LRAS is long-run aggregate supply and SRAS is short-run aggregate supply? 
A) The aggregate demand (AD) curve would shift from AD1 to AD2.
B) The short-run aggregate supply (SRAS) curve would shift from SRAS2 to SRAS1.
C) The short-run aggregate supply (SRAS) curve would shift from SRAS1 to SRAS2.
D) The aggregate demand (AD) curve would shift from AD1 to AD2 at the same time that the SRAS curve would shift from SRAS1 to SRAS2.
E) The aggregate demand (AD) curve would shift from AD2 to AD1.
Correct Answer:
Verified
Correct Answer:
Verified
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