Problem
1. Draw and carefully label an aggregate demand and supply diagram with initial equilibrium at P0 and Y0. a. Using the diagram, explain what happens when aggregate demand falls.
b. How is the short run different from the long run?
2. Draw an aggregate demand and supply diagram f Japan. In the diagram, show how each of the following affects aggregate demand and supply:
a. U.S. gross domestic product falls.
b. The level of prices in Korea falls.
c. Labor receives a large wage increase.
d. Economists predict higher prices next year
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.