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122) Use the dynamic aggregate demand and aggregate supply model and start with Year 1in a long-run macroeconomic equilibrium. For Year 2, graph aggregate demand,long-run aggregate supply, and short-run aggregate supply such that the condition ofthe economy will induce the president and Congress to conduct expansionary fiscalpolicy. Briefly explain the condition of the economy and what the president andCongress are attempting to do.122)Page Ref: 947-948/565-566Learning Outcome: Macro-6: Explain the aggregate supply-aggregate demand model.Table 16-6YearPotential Real GDPReal GDPPrice Level1$11.0 trillion$11.0 trillion100211.5 trillion11.7 trillion10933
123)Refer to Table 16-6.Suppose the economy is in the state described by the table above.What problem will occur in the economy if no policy is pursued? What fiscal policy toolscould be used to combat the problem? Draw a dynamic aggregate demand andaggregate supply diagram to illustrate the appropriate fiscal policy to use in thissituation.123)