The following scenario relates to questions 1-3. Suppose that an oil shock causes the long run aggregate supply curve (LRAS) to decrease by 10% but the Fed mistakes the noticeable increase in inflation as caused by a positive shock to Aggregate Demand. If the graph above represents the original state of the world, which graph below properly represents the LRAS true shock (LRAS-T) and the AD false shock (AD-F)?

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