From the list below, choose ONE answer that best describes what would occur INITIALLY in the following AD (aggregate demand) AS (aggregate supply) situations.

Shift to the right of the AD curve

Move to the left (down) along the AS curve

Move to the right (down) along the AD curve

Shift to the left of the AS curve

Move to the left (up) along the AD curve

Shift to the right of the AS curve

Move to the right (up) along the AS curve

Shift to the left of the AD curve

Situation 1: Throughout the economy, wage agreements are including large cost of living adjustments.

Situation 2: A large increase in interest rates leads to decreases in capital spending.

Situation 3: Inflation erodes the real value of financial wealth, causing consumers to decrease spending.

Situation 4: The recent government budget injects money into education and healthcare.

These are all independent situations.