Figure 11-4 What Happens in the Economy Illustrated in Figure

Multiple Choice

Figure 11-4 What happens in the economy illustrated in Figure 11-4 if government purchases increase by the amount necessary to achieve full employment?

A) The AD curve shifts to the right, the SRAS curve shifts to the left, and long-run equilibrium is achieved.
B) The AD curve shifts to the right, the price level increases, and long-run equilibrium is achieved.
C) The AD curve shifts to the right, the price level increases, and unemployment increases.
D) The AD curve shifts to the left, the price level increases, and employment decreases.
E) The SRAS curve shifts to the left, the price level decreases, and long-run equilibrium is achieved.