Suppose the Economy Is Initially at Potential GDP $A$
(B) Suppose Guverment Purchases Increase

Essay

Suppose the economy is initially at potential GDP.
(A) Draw an agregate demand curve and price adjustrient line, and label the intial equilibriun with an $A$ .
(B) Suppose guverment purchases increase. Illustrate the short-run effect an your diagram. Label the new equilibrium writh a $A$ .
(C) Eigalain the short-run effect an $C , I , Q , X , R$ , and infletion as campared to baseline.
(D) Illustrate the long-run effect on your diagram and label the long-run equilibriun writh $C$
(E) Eoglain the long-run effect an $C , I , G , X , R$ and inflation as campared to baseline.