1. There is an increase in AD. Show on the same AD/AS diagram the effect on output and prices in both the short-run and the long-run. Assume we start at Pl and Qn. At the end of the short-run, we are at P2 and Q2. At the end of the long-run, we are at P3 and Q3. State the effect on prices, output, unemployment, and wages in both the short-run and long-run, so you should have 2 answers for each variable, one for the short-run and one for the long-run. For the long-run, answer what happens compared to where we were at the end of the short-run, not compared to where we started before there was an increase in AD. You will not have the long-run aggregate supply curve on this diagram. Only the AD and SRAS curves. You will show what happens in the long-run by shifting one of these curves. 2. There is an increase in the cost of an input into the production of many goods. Show on the same AD/AS diagram the effect on output and prices in both the short-run and the long-run. Assume we start at Pl and On. At the end of the short-run, we are at P2 and Q2. At the end of the long-run, we are at P3 and Q3. State the effect on prices, output, unemployment, and wages in both the short-run and long-run, so you should have 2 answers for each variable, one for the short-run and one for the long- run. For the long-run, answer what happens compared to where we were at the end of the short-run, not compared to where we started before the increase in the input cost. Only the AD and SRAS curves. You will show what happens in the long-run by shifting one of these curves