Question

Assume the U.S. economy is in both short-run and long-run equilibrium, as shown in the graph below. Suppose the federal government increases the amount of spending on the military. either the new a. Show the effect on the short-run equilibrium as a result of increased government spending. Using the graph, dra AD curve or new AS curve resulting from this change in spending. Instructions: Use the tool provided 'New Curve' to plot the appropriate line. After placing the curve, click on 'Select' and choose whether to label the curve 'AD,' or 'AS' from the dropdown menu. AD and AS in the United States Tools LRAS New Curve Price Level Real GDP , which will be followed by b. In the short run, the economy will experience (Click to select) as real GDP (Click to select) (Click to select as real GDP (Click to select) 7 back to the full-employment level.

Answer 1

a AD curve shifts rightward. NO ΛΟ Blanks - GDP; decreases. Inflationary gap decrease or leftward ; enceeds potential shift in AS;