An article in the Wall Street Journal stated that “Japan’s cabinet approved a government stimulus package that includes ¥7.5 trillion ($73 billion) in new spending, in the latest effort by Prime Minister Shinzo Abe to jump-start the nation’s sluggish economy.”
a. Draw an aggregate demand and aggregate supply graph that shows where the Japanese government expects the economy to be without the stimulus package. Briefly explain what you graph shows.
b. In the same graph, show the effect of the stimulus package on the economy. Briefly explain what your graphs shows.