Which movement best demonstrates the effect of social relief grants offered to households negatively affected by the COVID-19 lockdown?

Social relief grants provide financial assistance to households, increasing their disposable income. This leads to an increase in household consumption, which is a component of aggregate demand. Therefore, social relief grants primarily cause an increase (rightward shift) in the aggregate demand (AD) curve. The intended outcome of such grants is to stimulate economic activity and increase overall output.

The figures show shifts in the aggregate supply (AS) curve, not the aggregate demand curve.

• Figure 3 illustrates a rightward shift of the AS curve (from $AS_0$ to $AS_1$), leading to a new equilibrium ($E_1$) with a higher output (Y) and a lower price level (P) compared to the initial equilibrium ($E_0$).
• Figure 4 illustrates a leftward shift of the AS curve (from $AS_0$ to $AS_1$), leading to a new equilibrium ($E_1$) with a lower output (Y) and a higher price level (P) compared to the initial equilibrium ($E_0$).

While social relief grants directly increase aggregate demand (a shift not explicitly shown in Figure 3 or 4), their primary goal is to increase economic output. Of the movements shown, the movement from $E_0$ to $E_1$ in Figure 3 is the only one that demonstrates an increase in equilibrium output. This aligns with the policy's objective of stimulating the economy.

The movement that best demonstrates the effect of social relief grants is: