Answer this question based on the above figure:

a) At which point in the above Figure is the economy in equilibrium? [0.5 mark]

b) What happens if the economy is at point K? [0.5 mark]

c) What happens if the economy is at point L? [0.5 mark]

d) At which point in the above Figure is the economy in a recession? [1 mark]

e) Suppose that investment spending increases by $10 million. What will happen to the AE line (the AE line stays where it is, the AE line shifts up or the AE line shifts down). [0.5 mark]

f) Will the real GDP increase, decrease or stay unchanged because of investment spending increasing by $10 million? If real GDP changes, by how much will it change (assume that the MPC is 0.9). [0.5 + 0.5 mark]