'* \""- wvu rrtLl'S PRO #1 In an ' . is "05::an 1116 question. you should emphasize the line of reasoning that generated your results; it required 0_Ugh to [rat the results of your analysis. Include correctly labeled diagramS. if useful or . In eXplalnlng your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show dlreconal changes. If the US in a long-run equilibrium A) Draw an ADIAS graph correctly labeled with i) the current equilibrium output and price levels labeled as Ye and Pie ii) the LRAS B) if the gov't increases spending on defense and does not raise taxes i) on part (a) graph show change in AD ii) What does this action do to the unemployment rate in the short run equilibrium after the increase in gov't spending run? EXPLAIN C) If the economy moves to new long- part (a) label the new long-run equilibrium price level as PL2 i) on your graph in in the new long-run equilibrium compare with that in the ii) how will the short-run AS curve initial long-run equilibrium in part (a)? EXPLAIN D) The gov't decides to nance the spending In part (b) with funds borrowed from the public. _ ble funds market show the effect of the gov't borrowrng Correctly draw and label a graph of the loana on the real interest rate. E) Based on the change in real interest rate in (d) what happens to i) inveslment ii) Economic growth rate EXPLAIN