Sketch aggregate demand and short-run aggregate supply, Microeconomics

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Sketch aggregate demand and short-run aggregate supply

A. Sketch the Aggregate Demand, Short-Run Aggregate Supply, and Long-Run Aggregate Supply of an economy in long-run equilibrium.

B. Suppose the Federal Reserve decreases the money supply. How does that aect the equilibrium interest rate?

C. Does an increase in the money supply impact AD, SAS, or LRAS? Show the impact on the graph in A.

D. Why might the Federal Reserve choose to decrease the money supply?

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Microeconomics: Sketch aggregate demand and short-run aggregate supply

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