Use the following to answer questions: Figure: Policy Alternatives -(Figure: Policy Alternatives) Refer to Figure: Policy Alternatives. If the economy is in equilibrium at Y₁ in panel (a) and the government does not intervene, the result will likely be: A) a shift of AD₁ to the left. B) a shift of SRAS₁ to SRAS₂. C) a shift of LRAS to the left. D) no change in AD or SRAS.

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If the economy is in equilibrium at Y1 and the government does not intervene, the short-run aggregate supply (SRAS) is likely to shift to the right (from SRAS1 to SRAS2) as prices and wages adjust, moving the economy back to its potential output.

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