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This Question: 3 pts 5 of 24 This Test: 41 pts possible The diagram shows the AD, AS, and Y* curves for an economy. Suppose the economy begins at point A. Then the government increases its level of purchases (G). a. In the short run, this fiscal expansion will shift the O A. AD curve right, lowering the price level and equilibrium GDP. O B. Y* curve left, lowering the price level and equilibrium GDP. O C. AD curve right, raising the price level and equilibrium GDP. O D. Y* curve right, raising the price level and equilibrium GDP. Price Level PO b. In the long run, wages and unit costs O A. rise, shifting the AS curve to the left. O B. fall, shifting the AD curve to the left. O C. fall, shifting the AS curve to the right. * AS AD 1 ADO O D. rise, shifting the AD curve to the right. Real GDP c. In going from the initial to the new long-run equilibrium, the composition of real GDP O A. may change because there could be some crowding out of public investment. O B. will change because there is no effect on the current level of potential output in the long run. O C. will not change because there is no effect on the current level of potential output in the long run. O D. may change because there could be some crowding out of private investment. d. If instead of an increase in government purchases there was a reduction in the net tax rate, O A. there could be a positive effect on the level and growth rate of potential output. O B. there will be less investment and a fall in equilibrium GDP. O C. the price level would fall in the long run. O D. there would be no effect on the current level of potential output in the long run