Final answer:
Adjusting labels on AD/AS graphs involves understanding economic indicators' interactions, and how factors like government spending and international trade influence aggregate demand and supply curves.
Step-by-step explanation:
Completing the graphs and adjusting labels such as Aggregate Expenditures (AE), Aggregate Demand (AD), Aggregate Supply (AS), the Price Level (PL), the Equilibrium Price Level (PLeq), and Real Domestic Output involve understanding the dynamics between these economic indicators. In the context of international trade, these labels can be affected by various factors such as government spending, consumer and business confidence, and changes in the price of key inputs. For example, encouraging imports may influence the AD curve due to changes in net exports (X-M), which is a component of AD. This could lead to a shift in the AD curve to the left, decreasing the equilibrium quantity of output and the price level.
An increase in government spending shifts the AD curve to the right, indicating an increase in income and price levels, demonstrating how policy choices can impact aggregate demand. Additionally, understanding how international capital flows can create trade imbalances is crucial for a comprehensive analysis of the AD/AS model. Scenario-driven analysis, as suggested by the 'Try It! Problems', helps in visualizing the impact of specific events on the economy of a given country.