Final answer:
Foreign investment in the U.S. can lower interest rates, boost investment and consumer spending, leading to higher output, price levels, and employment, reflected in the AD/AS model by a rightward shift of the AD curve.
Step-by-step explanation:
If foreign wealth-holders decide that the United States is the safest place to invest their savings, we would anticipate an increase in the demand for U.S. financial assets. This can lead to a decrease in interest rates and make borrowing more affordable, encouraging investment in capital and possibly increasing consumer spending due to the wealth effect.
In the AD/AS model, this would be shown as a rightward shift of the aggregate demand (AD) curve. Assuming the aggregate supply (AS) curve remains the same, the intersection of the AD and AS curves would move to a higher output and price level. This would result in an increase in output, an increase in price level, and because more output typically requires more labor, we would see an increase in employment. Thus, the correct answer from the provided options would be (a) Increase in output, increase in price level, increase in employment.