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Question 3 Use the two-panel Graph below to answer the questions that follow. The economy's original equilibrium is denoted point A in each graph. Panel 1: Aggregate Expenditures Panel 2: Aggregate Demand & Supply AE = Y P LRAS SRAS AE _AE, B SRASO AED E AE2 680 D 109.8 594 104.9 102 AO - AD] 450 ADO YO 1,966 Y2 Real_GDP 1,840 1,966 2,123 2,251 Y Note: For your answers that have decimals, use two (2) decimal places. 1) Suppose businesses increased gross investment expenditures by $86 million. In the Aggregate Expenditures model, this increase in business investment spending will a) shift the Aggregate Expenditures curve and put the economy at point B. b) move the economy from point A to point D. shift the Aggregate Expenditures curve and put the economy at point C. d) move the economy from point A to point E. e) have no effect on Aggregate Expenditures 2) The increase in business investment expenditures will directly: a) increase the marginal propensity to spend. increase net exports. reduce interest rates. increase autonomous expenditures e) increase the money supply. 3) (Part 1) In Panel 2 of the graph, the increase in investment expenditures will a) shift the Aggregate supply curve left in the short run b) shift the Aggregate Supply curve left in the short run c) move the economy up along the Aggregate Demand curve in the short run d) move the economy vertically up the Long-Run Aggregate Supply curve e) shift the Aggregate Demand curve right in the short run. (Part 2) and a) create a recessionary gap in the short run. b) raise inflation without any output effect in the short run. create a stagflation in the short run. create an inflationary gap in the short run. e) raise the natural rate of unemployment in the short run. (Part 3) The short-run output gap measured in the Aggregate Demand-Aggregate Supply model (Panel 2) is **#*#* 4) Based on the Aggregate Demand - Aggregate Supply model (Panel 2), the increase in investment expenditures: a) Raised output in the short run by: ******. b) Caused how much inflation in the short run? ****** 5) The increase in business investment expenditures increased autonomous expenditures by: ****** 6) Calculate the expenditures multiplier in the Aggregate Demand-Aggregate Supply model (Panel 2) based on output changes resulting from the increase in business investment expenditures: **#** 7) Using numbers from the Aggregate Demand-Aggregate Supply model (Panel 2), what is the new equilibrium output in the Aggregate Expenditures model (Panel 1) after the increase in business investment expenditures? ****#* 8) Calculate the expenditures multiplier from the Aggregate Expenditures model (Panell): ****#*. Based on the Aggregate Expenditures model (Panel 1), how much inflation resulted from the increase in business investment expenditures? ***$*# 10) Based on the Aggregate Demand - Aggregate Supply model (Panel 2), the economy's long-term response to the increase in business investment spending will a) move the economy to equilibrium at point A and leave output unchanged at 1,966. b) move the economy to a new equilibrium at point J and increase output to 2,251. C) move the economy to a new equilibrium at point M and reduce output to 1,840 d) move the economy to a new equilibrium at point L and leave output unchanged at 1.966. e) move the economy to a new equilibrium at point K and increase output to 2,123