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Part 2: Short Answer Questions (30 points) Problem 3: Short run and long run economic analysis (20 points) Suppue thar he gonemanses hosabs incentive to consume. Consider the impact of this event on the short run economy and long run economy using the AD/AS model. Draw here the following the AD/AS diagram. Assume, for the sake of your graphs, that the economy begins in the long run equilibrium (i.e., the output equals to potential output), denoted as point A. Show the starting point A and the shortun equilibrium point A that occurs due to the increase in income tax. Draw and label your graphs carefully showing the short run effect of the increase in income tax. (10 points)Problem 4: Short run and long run economic analysis (10 points) Assume that the economy experiences a negative permanent supply shock i) Use the AD/AS diagram to illustrate what happens to the inflation rate and the aggregate output in the short run when the monetary authority responds to this shock by changing monetary policy in order to stabilize inflation. Assume, for the sake of your graph, that the economy begin.s in the long run equilibrium, where the inflation rate equals the target inflation rate and the output equals the potential output. Draw and label your graphs carefully. ii) Does the divine coincidence hold true in this case? YES. The divine coincidence holds true when permanent supply shocks hit the economy, as the monetary authority can stabilize inflation and output at the same time.

HELP!! Need to know how to do the graphs for these. And can you please explain it to me so I can learn it?

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LRAS ut-the economy で A. A Ab and ths na ocewss at has tallon ode ati and rudue hargaining bou AD Natte au bed bin bot ti avel andl National o kand due右 run, in uram and thus SRAs usul 右sde, and thus

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