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Assuming the economy is represented by the graph shown, if the government were to enact an expansionary fiscal policy, it would be most likely to move from:

Multiple Choice
equilibrium A to B.
equilibrium D to C.
equilibrium B to A.
equilibrium D to B.

To address the question, we need to understand the impact of expansionary fiscal policy on the economy represented by the graph. Here’s the analysis:

1. **Expansionary Fiscal Policy**: This involves the government increasing its spending and/or decreasing taxes to stimulate economic growth. The goal is to increase aggregate demand (AD).

2. **Graph Analysis**:
   - **AD Curve**: Aggregate Demand curve shows the total quantity of goods and services demanded across all levels of prices.
   - **SRAS Curve**: Short-Run Aggregate Supply curve shows the total quantity of goods and services that producers are willing and able to supply at different price levels in the short run.
   - **LRAS Curve**: Long-Run Aggregate Supply curve is vertical, indicating that in the long run, the total output of an economy depends on the resources available and not on the price level.

In the given graph:
- Points A, B, C, and D represent different equilibria where AD intersects SRAS and/or LRAS.
- An expansionary fiscal policy shifts the AD curve to the right (from AD1 to AD2, AD3, etc.).

**Possible Equilibrium Shifts**:
- **Equilibrium A to B**: Moving from lower AD curve (AD1) to a higher one (AD2), this suggests an increase in AD.
- **Equilibrium D to C**: This suggests a shift from a higher price level and output (AD4) to a lower price level and output (AD3), which is not typical for expansionary policy.
- **Equilibrium B to A**: This indicates a decrease in AD, contrary to what we expect with expansionary policy.
- **Equilibrium D to B**: This involves a move from a high AD (AD4) to a moderate AD (AD3), indicating a reduction, which is not the intended effect of expansionary policy.

### Conclusion:
The most likely movement due to expansionary fiscal policy would be from a lower equilibrium to a higher one, reflecting increased aggregate demand. Thus, the correct answer is:

**Equilibrium A to B.**

Would you like further details or have any questions? Here are five more questions you can ask:

1. How does expansionary monetary policy affect the aggregate demand and supply graph?
2. What are the effects of contractionary fiscal policy on an economy?
3. Can you explain the differences between short-run and long-run aggregate supply curves?
4. How does inflation impact the aggregate demand curve?
5. What are the potential drawbacks of using expansionary fiscal policy?

**Tip:** Understanding how different fiscal policies shift the AD curve is crucial in analyzing their impact on the economy.

Understand the impact of expansionary fiscal policy on the economy using an aggregate demand and supply graph. Learn how fiscal policy affects equilibrium points and aggregate demand levels.

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