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-(Figure: Classical Model of the Price Level) Refer to Figure: Classical Model of the Price Level. If the central bank increases the money supply such that aggregate demand shifts from AD₁ to AD₂, according to this classical model, the price level will:

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-(Figure: Classical Model of the Price Level) Refer to Figure: Classical Model of the Price Level. If the central bank increases the money supply such that aggregate demand shifts from AD₁ to AD₂, according to this classical model, the price level will:

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In the classical model, an increase in the money supply shifts aggregate demand rightward, leading to a proportional increase in the price level from P₁ to P₃.

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