AS 150 125 Price level 100 (CPI) 75 E1 50 AD2 25 AD 2 4 10 12 Real GDP (billions of dollars per year) Refer to the diagram and select the correct statement from below: Statement 1: During World War II, the U.S. government spent billions of dollars on aircraft, ships, and munitions. This government spending raised both employment and output. It also sparked much higher prices for all kinds of goods. This will be reflected in the graph as a Shift of AD1 to AD2. Statement 2: The original equilibrium price level is at $75 and the new equilibrium real GDP is at $8 billion. Statement 2 is correct while statement 1 is false. Statement 1 is correct while statement 2 is false Both statements are correct. Both statements are false