Use the following to answer question 16 Figure An Increase in Aggregate Demand Price level P3 P P LRAS SRAS Y Yp Y SRAS AD Real GDP AD 16 Figure An Increase in Aggregate Demand Assume that the economy is initially long run equilibrium at Yp and P Now suppose that there is an increase in the leve government purchases at each price level This will A shift aggregate demand from AD to AD B shift aggregate demand from AD to AD2 C lead to increased output and a decrease in the price level D lead to decreased output and price level