Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps) Refer to Figure: Inflationary and Recessionary Gaps. A movement from AD₃ to AD₁ could be caused by: A) increased government purchases. B) increased government transfers. C) higher tax rates. D) lower tax rates.

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A movement from AD3 to AD1 indicates a decrease in aggregate demand, which could be caused by higher tax rates as they reduce consumers' disposable income, leading to decreased consumption and investment.

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