THE NEXT THREE (3) QUESTIONS ARE BASED ON THE FOLLOWING DIAGRAM: LRAS Price Level ERAS C A AD, m32 AD, 0 Quantity.r of Output 5. In a closed economy, what could cause the economy to move from point B to point A? (1) An increase in government spending (2) A contraction of the money supply (3) A decrease in the price level (4) A monetary injection 6. In an open economy, which ofie following would cause the AD curve to shift from AD1 to AD:? (1) A11 increase in government expenditures when the exchange rate is fixed (2) An increase in government expenditures when the exchange rate is exible (3) An increase in taxes when the exchange rate is exible (4) A contraction of the money supply when the exchange rate is exible ?. If the economy represented in the diagram was a closed economy and if the economy was at point A, a government policy to restore full equilibrium would be: (1) a reduction in the size of the government decit. (2) an open-market sale. (3) a contraction of the moneyr supply. (4) an increase in the money supply. B. In a small open economy with perfect capital mobility, if the Bank of Canada chooses to x the value of die Canadian dollar, an expansionary monetary policy would cause die dollar to and thus require the Bank of Canada to Canadian dollars in die market for foreign currency exchange. (1) depreciate; purchase (2) appreciate; purchase (3) appreciate; sell (4) depreciate; sell 3. In a small open economy with perfect capital mobility, an expansionary monetary policy: (1) shifts aggregate supply to the right. (2) shifts aggregate demand to the right. (3) shifts aggregate demand to the right only if the exchange rate is fixed. (4) shifts aggregate demand to the right only if the exchange rate is flexible