Homework: Fiscal Policy and the Federal Budget (Ch 11) On the following graph, AD, represents the initial aggregate demand curve in a hypothetical economy, and SR.AS represents the initial aggregate supply curve. The economy's natural real GDP is $12 trillion,Homework: Fiscal Policy and the Federal Budget (Ch 11) NRGDP 106 SRAS 104 102 PRICE LEVEL AD, 100 AD AD, 10 12 14 10 REAL GDP (Trillions of dollars)The initial short-run equilibrium level of real GOP is and the initial short-run equilibrium price level is Suppose the government, cooking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to critics of Keynesian fiscal policy, which curve in the previous graph will most likely be the new aggregate demand curve? O AD, O AD O AD, As a rewilt, the equilibrium level of real GDP will be and the equilibrium price level will be According to critics of Keynesian fiscal policy, which of the following is true in this case? The increase in deficit-financed government spending has no impact on real GDP and the price level. The increase in deficit-financed goverment spending causes real GDP to Increase to natural real GOR O meal GDP does not increase; only the price level increases. The Increase In deficit-financed government spending causes real GDP to increase, but not to natural real GDP, This is an example of