Please complete the two attached graphs and answer the following questions for this.

A. Suppose that for every increase in the interest rate of one percentage point, the level of investment spendingdeclinesby $2.5 billion. Based on the changes made to the money market in the previous scenario, would the new interest rate causes the level of investment spending to Rise or Fall? And by $1.02 billion, $0.62 billion, or $2.5 billion?

B. Taking the multiplier effect into account, will the change in investment spending cause the quantity of output demanded to decrease or increase? And $1.2, $2, or $5 billion at every price level?

7. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy in which households spend $0.75 of each additional dollar they earn and save the $0.25 they have left over. The following graph plots the economy's initial aggregate demand curve (AD]). Suppose now that the government increases its purchases by $3.75 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD2) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD2) is parallel to AD1. You can see the slope of AD, by selecting it on the following graph. 116 A 114 AD 2 112 AD 110 AD 3 108 PRICE LEVEL 106 104 102 100 100 105 110 115 120 125 130 135 140 OUTPUT (Billions of dollars)The following graph plots equilibrium in the money market at an interest rate of 1.5% and a quantity of money equal to $45 billion. Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph. 3.0 Money Supply O 2.5 Money Demand 2.0 Money Supply 1.5 INTEREST RATE 1.0 Money Demand D.5 15 30 45 60 75 90 MONEY (Billions of dollars)