1. For each of the following events, explain the short-run and
long-run effects on output and the price level, assuming
policymakers take no action using a AS-AS-LRAS graph. (8
points)
a. The stock market declines sharply, reducing consumers’
wealth.
b. The federal government increases spending on national
defense.
c. A technological improvement raises productivity.
d. A recession overseas causes foreigners to buy fewer U.S.
goods and services.
e. Using AS-AD-LRAS graph, explain the consequences of the
budget deficit on output...