Exhibit 16A-1 Policy Alternatives in Panel (A)of Exhibit 16A-1

Exhibit 16A-1 Policy Alternatives In Panel (a) of Exhibit 16A-1, the economy is initially in short-run equilibrium at real GDP level Y₁ and price level P₂. Classical theory argues:

A) the federal government must shift AD₁ to AD₂ as shown in Panel (b) .
B) the federal government must shift SRAS₁ to SRAS₂.
C) that SRAS₁ will shift to SRAS₂ without government intervention.
D) that AD will shift rightward without government intervention.