Use the following to answer questions: Figure: Inflationary and Recessionary Gaps -(Figure: Inflationary and Recessionary Gaps) Look at the figure Inflationary and Recessionary Gaps. A movement from AD₁ to AD₃ could be caused by: A)increased government purchases. B)decreased government transfers. C)higher tax rates. D)decreased government purchases.

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Increased government purchases would shift the aggregate demand curve to the right, from AD1 to AD3, indicating an increase in overall demand in the economy.

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