The graph shows an economy below full employment.
To restore fullemployment, the government increases government expenditure by $0.5 trillion. Draw a curve to show the effect of the increase if it is the only change in spending plans. Label the curve AD0+Upper DeltaΔE.
The increase in government expenditure sets off a multiplier process. Draw a curve that shows the multiplier effect that returns the economy to full employment. Label it AD1.
Draw a point at thefull-employment equilibrium.