Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD1AD1).Suppose now that the government increases its purchases by $3 billion.

Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD2AD2) after the multiplier effect takes place.

Hint: Be sure the new aggregate demand curve (AD2AD2) is parallel to AD1AD1. You can see the slope of AD1AD1by selecting it on the following graph.

(?) 116 A 114 AD ? 112 110 AD 3 PRICE LEVEL 108 106 104 102 100 100 102 104 106 108 110 112 114 116 OUTPUT (Billions of dollars)