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# Suppose that the price level in the economy of Zap as described in problem 1 is $100 .$ The economy is also at full employment. a If the government of Zap increases...

## Question

###### Suppose that the price level in the economy of Zap as described in problem 1 is $100 .$ The economy is also at full employment. a If the government of Zap increases its expenditures on goods and services by $€ 10$ billion, what happens to the quantity of real GDP demanded? b How does Zap's aggregate demand curve change? Draw a two-part graph that is similar to Figure 25.9 to illustrate the change in both the $A E$ curve and the $A D$ curve. $\mathrm{C}$ In the short run, does equilibrium re

Suppose that the price level in the economy of Zap as described in problem 1 is $100 .$ The economy is also at full employment. a If the government of Zap increases its expenditures on goods and services by $€ 10$ billion, what happens to the quantity of real GDP demanded? b How does Zap's aggregate demand curve change? Draw a two-part graph that is similar to Figure 25.9 to illustrate the change in both the $A E$ curve and the $A D$ curve. $\mathrm{C}$ In the short run, does equilibrium real GDP increase by more than, less than or the same amount as the increase in the quantity of real GDP demanded? d In the long run, does equilibrium real GDP increase by more than, less than or the same amount as the increase in the quantity of real GDP demanded? e In the short run, does the price level in Zap rise, fall or remain unchanged? f In the long run, does the price level in Zap rise, fall or remain unchanged?

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