a country’s economy is in a short run equilibrium with an output level less that the full employment output level. assume an upward sloping aggregate supply curve. (a) using a correctly labeled ahead aggregate demand and aggregate supply graph shows the following (i) full employment output labeled as Yf (ii) equilibrium real output and price level labeled as Ye and PLe respectively
(b) assume that the country’s government increases domestic military expenditures. On the graph from part (a) show how the increased military expenditures affect the following in the short run. (i) aggregate demand. (ii) equilibrium real output and price level labeled as Y2 and PL2 respectively
(c) using a correctly labeled graph of the short run Phillips curve, show the effect of the increased military expenditures in the short run labeling the initial point as A and the new point as B
