Predict, with the aid of the IS-LM and the SAS-AD models, the
short-run and long-run results when consumer optimism
increases.
Assume the economy is initially in long-run equilibrium at the
natural real GDP.
To receive full credit make sure to do the following:
(i) Explain why each curve shifts.
(ii) Clearly label the starting equilibrium.
(iii) Clearly label at least 2 short-run equilibrium points.
(iv) Clearly label the final long-run equilibrium.
(v) What happens to the interest rate, output, price...