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Question 25

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Use the following to answer questions: Use the following to answer questions: -(Figure: Fiscal Policy I) Refer to Figure: Fiscal Policy I. Suppose that this economy is in equilibrium at E<sub>2</sub>. If there is an increase in government transfers_____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP. A) AD<sub>2;</sub> right; increase; increase B) AD<sub>2;</sub> left; decrease; decrease C) AD<sub>1</sub>; right; increase; increase D) AD<sub>1</sub>; right; decrease; increase
-(Figure: Fiscal Policy I) Refer to Figure: Fiscal Policy I. Suppose that this economy is in equilibrium at E2. If there is an increase in government transfers_____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.


A) AD2; right; increase; increase
B) AD2; left; decrease; decrease
C) AD1; right; increase; increase
D) AD1; right; decrease; increase

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