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Assume an equal increase in government spending ($G$) and in taxes ($T$), which of the following is true, when the AS is upward sloping?


There will be no change in AD.


AD will increase and so will real GDP.


AD will increase but there will be no change in real GDP.


Only aggregate supply will increase and will increase real GDP.


AD will increase and AS will decrease leading to no change in real GDP and a reduction in the price level.

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