(Figure: Fiscal Policy I) Use Figure: Fiscal Policy I. Suppose that this economy is in equilibrium at E2. If there is an increase in government transfers, _____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.
A) AD2; right; increase; increase
B) AD2; right; increase; increase.
C) AD2; left; decrease; decrease
D) AD2; left; decrease; decrease.
E) AD1; right; increase; increase
F) AD1; right; increase; increase.
G) AD1; right; decrease; increase
H) AD1; right; decrease; increase.
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