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The graph below depicts a decrease in aggregate demand due to a decrease in gross investment. This decrease in aggregate demand is depicted as a
The graph below depicts a decrease in aggregate demand due to a decrease in gross investment. This decrease in aggregate demand is depicted as a shift from AD to AD1 Tools LRAS Price Level ADYa. In the long run, aggregate supply will adjust to move the economy back to the full-employment level of output. Show this shift using the graph above. Instructions: Use the tool provided "AS," to show the movement back to full-employment output. Plot only the endpoints of the line. keeping AS, parallel to AS with the appropriate intersection (2 points totalk, b. How does the new long-run equilibrium compare to the Initial full-employment level before the decrease in gross investment? O The price level is higher, but output is lower O The price level is lower, but output is higher O The price level is lower, but output remains the same The price level is higher, but output remains the same. [ c. Suppose instead the government decides to undertake fiscal policy to move the economy toward full employment knowing there is a marginal propensity to consume greater than 0. Show this shift using the graph below. Instructions: Use the tool provided "AD?" to show the fiscal policy action but not the resulting in the total multiplier effect. Plot only the endpoints of the line keeping ADy parallel to AD (2 points total]\fAD AD Real GDP d. Suppose the combination of fiscal policy action and the multiplier effect moves the economy back to full employment. How does the long-run equilibrium with the fiscal policy action compare to the initial full-employment level before the decrease in gross investment? O The price level and output both remain the same. O The price level is lower, but output is higher O The price level is higher, but output remains the same, O The price level remains the same, but output is lower
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