urning back to your AD/AS diagram derived in part a): i. Draw the shift (if any) of the AD curve, due to the increase in government expenditures. ii. Does the increase in G have any effect on the MP curve or the AS and LRAS curves? iii. Determine the short-run equilibrium following the increase in government expenditures, labeling this new equilibrium point B. At this point, what do you expect should happen to inflation compared to point A? Is the real interest rate at point B higher or lower than in point A? [Hint: Consider the Taylor principle in your answer]. iv. In the short-run equilibrium B, is consumption and investment higher or lower compared to point A? v. As we approach the medium run, which curve do you expect should move in the AD/AS diagram? Draw the shift and label the medium run equilibrium point C