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Refer to the Figure Below

Question 1

Multiple Choice

Refer to the figure below.Suppose the economy is initially in equilibrium with output Y2 and inflation rate of 3.An increase in military spending will: Refer to the figure below.Suppose the economy is initially in equilibrium with output Y<sub>2</sub> and inflation rate of <sub>3</sub>.An increase in military spending will: A) shift AD from AD<sub>2</sub> to AD<sub>1</sub>. B) shift AD from AD<sub>1</sub> to AD<sub>2</sub>. C) shift AS from AS<sub>2</sub> to AS<sub>1</sub>. D) shift AS from AS<sub>1</sub> to AS<sub>2</sub>.


A) shift AD from AD2 to AD1.
B) shift AD from AD1 to AD2.
C) shift AS from AS2 to AS1.
D) shift AS from AS1 to AS2.

Correct Answer:

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