1. Assume that the United States economy is currently operating below the full-employment level of real gross domestic product with a balanced budget.
(a) Draw a correctly labeled graph of aggregate demand, short-run aggregate supply, and long-run
aggregate supply, and show each of the following in the United States.
(i) Current output and price level, labeled as Y1 and PL1, respectively
(ii) Full-employment output, labeled as Yf
(b) The United States government increases spending on goods and services by $100 billion, which is
financed by borrowing. How will the increase in government spending affect each of the following?
(1) Cyclical unemployment
I
(ii) The natural rate of unemployment
© & (d) had changes in the interest rate that increased them...this is the assumption going forward.