Suppose Real and Potential GDP Are Initially Equal

Multiple Choice

Suppose real and potential GDP are initially equal. If government purchases change, which of the following best explains what will happen first?

A) Potential GDP will change by the same amount as aggregate expenditure.
B) The AD curve will shift.
C) Both the AD curve and the IA line will shift.
D) The IA line will shift.
E) There will be movement along the AD curve.