If an economy is in a recession and the government opts for an expansionary fiscal policy to shift the AD curve closer to the potential output, a sound finance economist with a Classical view, who holds the Ricardian equivalence theorem to be practically true, would conclude that the AD curve:
A. does not shift since the higher government spending is offset by higher private consumption.
B. does not shift since the higher government spending is offset by lower private consumption.
C. shifts to the left due to higher government spending.
D. shifts to the right due to higher government spending.
Answer: B
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