(Figure: Fiscal Policy II) Use Figure: Fiscal Policy II. Suppose that this economy is in equilibrium at E1. If there is a decrease in government purchases, _____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.
A) AD2; left; increase; decrease
B) AD2; left; increase; decrease.
C) AD2; left; decrease; decrease
D) AD2; left; decrease; decrease.
E) AD1; right; increase; increase
F) AD1; right; increase; increase.
G) AD1; left; decrease; decrease
H) AD1; left; decrease; decrease.
Correct Answer:
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