9. The economy is currently in the long-run macroeconomic equilibrium. a) Using a graph, show the economy's current state. b) Suppose, the government decides to raise the military spending. Using an...

Extracted text: 9. The economy is currently in the long-run macroeconomic equilibrium. a) Using a graph, show the economy's current state. b) Suppose, the government decides to raise the military spending. Using an appropriately labelled diagram explain what will happen in the economy now. c) What policies can the government take that might bring the economy back to long-run macroeconomic equilibrium? Show and explain the effect of one such policy with an appropriately labelled diagram. d) If the government did not intervene to close this gap, would the economy return to long-run macroeconomic equilibrium? Explain and illustrate with an appropriately labelled diagram.