Consider plot $1$ and plot $2,$ which plot a case of expansionary fiscal policy, as illustrated above. In plot $2,$ what is equilibrium output? Also, compare with the equilibrium output in plot $1$ after the fiscal policy is implemented

Group of answer choices

In plot $2,$ equilibrium output is Y$3,$ but interest rates are unchanged at r$1$ following the fiscal policy portrayed in plot $1.$

In plot $2,$ equilibrium output is Y$3,$ which is lower than Y$2.$ The gap between Y$3$ and Y$2$ may increase if the slope of the IS or LM curve is steeper $($in the graph, increased slope$).$

In plot $2,$ equilibrium output is Y$2,$ exactly the same as equilibrium output in plot $1.$ Interest rates increase to r$2$ due to crowding out effects.

In plot $2,$ equilibrium output is Y$1,$ which is lower than Y$2.$ Interest rates remain unchanged at r$1.$

In plot $2,$ equilibrium output is Y$3,$ which is lower than Y$2.$ This is due to crowding out effects as the private sector competes with government for funds, due to the higher interest rates r$2.$