**Question**: 2. Draw an AD-AS graph at equilibrium. Suppose there is an increase in government spending. Which curve will shift? Draw the new equilibrium.**Guidance for Educational Website**:To illustrate the effects of an increase in government spending on an economy, follow these steps on the AD-AS graph:1. **Initial Equilibrium**: Begin with the AD-AS model. The axes represent price level (vertical axis) and real GDP/output (horizontal axis). At equilibrium, the Aggregate Demand (AD) curve intersects the Aggregate Supply (AS) curve.2. **Impact of Increased Government Spending**: An increase in government spending will shift the AD curve to the right. This is because government spending is a component of aggregate demand.3. **New Equilibrium**: The rightward shift of the AD curve leads to a new intersection point with the AS curve, representing a higher output and price level in the economy.**Graph Explanation**:- **Initial Equilibrium**: Point where AD and AS intersect.- **Shift**: AD curve shifts right due to increased government spending.- **New Equilibrium**: New intersection of AD and AS, indicating increased output and higher price level. **Instructions**You will draw four separate Aggregate-Demand/Aggregate-Supply graphs. Each graph will have one curve shift. Be sure to label axes, curves, and equilibrium. Change colors to show the shift and label the new equilibrium.

The following diagram shows the AD-AS graph at equilibrium.

Answered: Draw an ADAS graph at equilibrium.…

Draw an ADAS graph at equilibrium. Suppose there is an increase in government spending. Which curve will shift? Draw the new equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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