Refer to the following figure to answer the questions that follow.
-Which of the following would be the theoretical outcome of expansionary fiscal policy in the following aggregate demand-aggregate supply model?
A) The aggregate demand (AD) curve would shift from AD₁ to AD₂.
B) The short-run aggregate supply (SRAS) curve would shift from SRAS2 to SRAS1.
C) The SRAS curve would shift from SRAS1 to SRAS2.
D) The AD curve would shift from AD₁ to AD₂ at the same time that the SRAS curve would shift from SRAS1 to SRAS2.
E) The AD curve would shift from AD₂ to AD₁.
Correct Answer:
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