The graph below depicts a decrease in aggregate demand due to a decrease in gross investment. This decrease in aggregatedemand is depicted as a shift from AD to AD1.ToolsLRASASAS1AD1ADReal GDPPrice Level c. Suppose instead the government decides to undertake fiscal policy to move the economy toward full employment knowing there isa marginal propensity to consume greater than 0. Show this shift using the graph below.Instructions: Use the tool provided 'AD2' to show the fiscal policy action but not the resulting in the total multiplier effect. Plot only theendpoints of the line keeping AD2 parallel to AD (2 points total).ToolsLRASASAD2AD1ADReal GDPPrice Level

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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 shift from AD to AD1. Tools LRAS AS AS, AD, AD Real GDP Price Level

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 AS AS, AD, AD Real GDP Price Level

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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
AS
AS1
AD1
AD
Real GDP
Price Level

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 'AD2' to show the fiscal policy action but not the resulting in the total multiplier effect. Plot only the
endpoints of the line keeping AD2 parallel to AD (2 points total).
Tools
LRAS
AS
AD2
AD1
AD
Real GDP
Price Level

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