Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions .
Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1
-(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1) Suppose the economy is initially at point A. Now suppose that there is an increase in government purchases. In the short-run,

A) the price level rises to P_b and real GDP increases to Y_b.
B) the price level rises to P_d.
C) the aggregate supply curve shifts up to SRAS₂.
D) the economy's potential output increases to Y_b.