Using Figure 1 above, if the aggregate demand curve shifts from AD2 to AD3 the result in the short run would be:

How does the form that government spending takes affect resource allocation between public goods and private goods?

Unemployment compensation payments:

A. rise during a recession and thus reduce the severity of the recession. B. rise during a recession and thus increase the severity of the recession. C. rise during inflationary episodes and thus reduce the severity of the inflation. D. fall during a recession and thus increase the severity of the recession.