Consider the figure to the right. Suppose that the real interest rate suddenly declines for reasons that have nothing to do with the value of the price level. What happens to the? nation's aggregate demand? curve? In the short? run, will the nation experience an inflationary gap or a recessionary? gap? Explain.

?1.) Using the line drawing? tool, draw a new AD curve that shows the effects of a sudden fall in the real interest rate. Label your line ?'AD2?.'

?2.) Using the point drawing tool?, indicate the? economy's new?short-run equilibrium price and level of real GDP. Label this point?'E2?.'

Carefully follow the instructions? above, and only draw the required objects.