The economy is in the short run equilibrium, at the point given below: Price level = 130, SR QD = 4 trillion SR QS = 3.9 trillion (LRAS = 4.3 trillion)

1.Consider Classical economy for this question. Using appropriate graphs, explain the impact of the economy in the long-run equilibrium.

2. Now consider Keynesian economy. Using details from Q (1), should the govt increase/decrease expenditure? By how much, given MPS = 0.4.