Infrastructure and passes several different tax cuts

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Start by drawing the Short-Run Aggregate Supply and Aggregate Demand diagram with short-run equilibrium at Price Level = 165 and real GDP = 2750. Next, the following shock hits the economy:

Concerned about an economic slowdown possibly turning into a big recession, the federal government both increases spending on infrastructure and passes several different tax cuts.

Which of the outcomes below could be the new short-run equilibrium after the shock?

1. price level=175; real GDP=3000

2. price level=175; real GDP=2600

3. price level=155; real GDP=2825

4. price level=155; real GDP=2675

Reference no: EM13771592

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