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1. Assume an economy is at a full-employment equilibrium. Then if Congress passes and the President signs into law $1 trillion in new infrastructure spending,
1. Assume an economy is at a full-employment equilibrium. Then if Congress passes and the President signs into law $1 trillion in new infrastructure spending, would this, ceteris paribus, be reflected as a change in aggregate demand or a change in aggregate supply? Explain. Be sure to clearly identify a textbook factor of AD or A3 that is causing this change. Would this change be an increase or decrease? Explain. Would this change result in the economy moving to a new short-run, below or above full-employment equilibrium? Explain. What do you predict will happen in the short-run to the equilibrium price level, the level of Real GDP and employment in the economy? Explain using textbook concepts and language
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