The figure below is a part of the AD-AS model as a description of the current situation of an economy. P PA=$10 A YA=4000 Y a. Find the short-run equilibrium (the real output and the price level) of this economy v b. We know that the natural level of output is 3500. Add the long-run supply curve onto the grap c. Graphically show how the economy would adjust to the long-run equilibrium, if the government does nothing d. If the government aims to avoid inflation but can endure deflation, what should the government do to adjust the economy to a long-run equilibrium? Graphically show your answer. .

Suppose that the economy is initially in long-run equilibrium with the price level of 800. Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green). 1200 ADX 1100- 1000 Price Level ADX 900- 800 700 600 50% RASI 400* 300- 200 100- LRAS 400 500 600 700 100 200 300 Real GDP What is the new price level in the short-run as a result of this shift? 800 900 1000 1100 120 a

Please write on the space provided what happens to each variable -- indicate whether each variable increases, decreases, or remains unchanged.  Please show in the graphs the initial equilibrium, short run equilibrium, and final long run equilibrium.  If possible, please provide only two graphs, one for IS-LM and one for AD-AS that show all of the equilibrium positions Suppose the economy is initially in a long-run equilibrium. Starting from this position, assume that an exogenous shock such as the Covid 19 pandemic pushes the economy away from the equilibrium.    Using the IS-LM and AD-AS framework, indicate what happens in the short run to output, unemployment, prices, interest rate, consumption, investments, and real money balances, as the economy moves from long-run equilibrium to short-run equilibrium. What economic condition is the economy in after the shock?  __________________   Short-run Output              ________________ Unemployment _________________ Prices…

On the following graph, use the black point (cross symbol) to show the short-run equilibrium. Then use the grey point (star symbol) to show the long- run equilibrium. PRICE LEVEL 120 110 100 1 LRAS REAL GOP In the short run, the price level is Natural Real GDP SRAS, SRAS, AD SRAS, AD AD₂ and Real GDP is ++ Short-Run Equilibrium ✡ Long-Run Equilibrium ? Natural Real GDP. In the long run, the price level is and Real GDP is A