RUM FINISH outputy employment is ? AP Macroeconomics Group 2 2. The economy is performing at a level of output that is less $500 Million less than the full employment level of real output. If the economy has a MPC of 0.8. a. Illustrate this situation using the AS/AD model and the Phillips Curve. Label the full employment level in both models as point A and the current level as point B. Explain the current economic situation by using the concept of output, savings, planned investment, unplanned inventories, inflation and unemployment. c. Explain how government could correct the situation using spending. If they decided not to change spending how could they correct the situation by changing taxes on individual's income. d. Illustrate the changes you suggest on a new AS/AD graph and Phillips Curve. e. If the government decided to leave the situation alone, explain and illustrate on a new AS/AD graph and Phillips Curve, how the economy would naturally correct the economic situation described originally. 9 unplanned invent ourput gap ? Unemployment inflation /