For each of the following events, use an AD-AS diagram to show the short-run and long-run effects
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For each of the following events, use an AD-AS diagram to show the short-run and long-run effects on output and inflation. Assume the economy starts in long-run equilibrium. LO1, L02, L03, LO4
a. An increase in consumer confidence leads to higher consumption spending.
b. The government reduces income taxes.
c. The Fed loosens monetary policy.
d. Oil prices drop sharply.
e. A war increases government purchases.
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