Problem I: Suppose the current price level is 10S, and the current level of RGDP is 17.2 trillion. Illustrate each of the following situations on a graph: The price level rises to 10S, while other variables remain constant. Firms become pessimistic and reduce their investment. Assume that the price level remains constant. Problem 2: Briefly explain whether you agree or disagree with the following statement: quot;Real GDP is currently 17.2 trillion, and potential GDP is 17.4 trillion. If the president were to increase government purchases by 200 billion or cut taxes by 200 billion, the economy could be brought to equilibrium at potential GDP.

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