1. Suppose the economy is in long-run equilibrium and firms become permanently less optimistic about the future marginal revenue products of capital. a. What would this development do to output in the short run? b. What is likely to happen to inflation after a while? c. Following its usual reaction function, how is the Federal Reserve likely to respond? d. When output is back to potential, is r* higher, lower, or the same as before the permanent change in expectations?