The initial short-run equilibrium level of real GDP isSuppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close theoutput gap. According to Keynesian economists, which curve in the previous graph will most likely be the new aggregate demand curve?AD3AD₁AD₂As a result, the equilibrium level of real GDP will beand the initial short-run equilibrium price level isand the equilibrium price level will beAccording to Keynesian economists, which of the following is true in this case?This is an example ofThe increase in deficit-financed government spending has no impact on real GDP or the price level.Real GDP does not increase; only the price level increases.The increase in deficit-financed government spending causes real GDP to increase to natural real GDP.The increase in deficit-financed government spending causes real GDP to increase, but not to natural real GDP. 5. Crowding outOn the following graph, AD₁ represents the initial aggregate demand curve in a hypothetical economy, and SRAS represents the initial aggregatesupply curve. The economy's natural real GDP is $12 billion.PRICE LEVEL106104102100989668NRGDPAD1012REAL GDP (Billions of dollars)14SRASAD316AD₂?

On the following graph, AD, represents the initial aggregate demand curve in a hypothetical economy, and SRAS represents the initial aggregate supply curve. The economy's natural real GDP is $12 billion. 108 104 ន PRICE LEVEL 100 98 98 8 8 NRGDP AD₁ 10 12 REAL GDP (Billions of dollars) 14 SRAS AD₁ 16 AD₂ (?)

On the following graph, AD, represents the initial aggregate demand curve in a hypothetical economy, and SRAS represents the initial aggregate supply curve. The economy's natural real GDP is $12 billion. 108 104 ន PRICE LEVEL 100 98 98 8 8 NRGDP AD₁ 10 12 REAL GDP (Billions of dollars) 14 SRAS AD₁ 16 AD₂ (?)

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 7PA

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