11Exhibit 3-1PLPSRASLRASADYY*GDPRRefer to Exhibit 3-1. The economy is currently producing at level Y. If aneconomist believes the economy (itself) can move to Y*, then he believes that theeconomy will likely stay "stuck" in short-run equilibrium.SRAS curve will shift rightward and intersect the AD curve.O AD curve will shift rightward and intersect the SRAS curve.LRAS curve will shift leftward until it intersects the SRAS and AD curves at Y.

Determinants of SRAS ShiftThe Short-Run Aggregate Supply, or SRAS, curve can shift to the right when…

Answered: 11 Exhibit 3-1 PL P SRAS LRAS AD Y Y*…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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Considering the growing potential threat of terrorists’ attacks worldwide, the President of an economyapproved a fiscal spending of $24 billion to upgrade its national defense. a. Starting in a long-run equilibrium, draw a well-labelled AD-SRAS-LRAS diagram for the economy. b. Use the same diagram in part (a) to show the SR effect on the economy’s GDP (Y), the price level, andunemployment when the federal government increases its spending on national defense. c. To stabilize the price level and the economy’s GDP, what kind of monetary policy should the economyadopt? Illustrate your answer in the same diagram in (a).
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please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
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