The diagram shows the AD, AS, and Y' cun/es 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 . AD cun/e right, lowering the price level and equilibrium GDP. . AD cun/e right, raising the price level and equilibrium GDP. . Y\" cun/e right, raising the price level and equilibrium GDP. . Y\" cun/e left, lowering the price level and equilibrium GDP. b. In the long run, wages and unit costs C- A. rise, shifting the AS curve to the left. B. fall, shifting the AD curve to the left. C. rise, shifting the AD curve to the right. t; D. fall, shifting the AS curve to the right. 0. ln going from the initial to the new long-run equilibrium, the composition of real GDP . will not change because there is no effect on the current level of potential output in the long run. may change because there could be some crowding out of public investment. . will change because there is no effect on the current level of potential output in the long run. 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, . there would be no effect on the current level of potential output in the long run. . there will be less investment and a fall in equilibrium GDP. . the price level would fall in the long run. . there could be a positive effect on the level and growth rate of potential output. Price Leve AS AD1 ADO