1.Use the AD-AS model to answer this question. Make sure you label all curves and equilibria.

a.Draw the AD-AS model for a situation with full employment. Include both the short-run and long-run supply curves. Call the current price level for P1 and the current output level for Y1.

b.Lately, people have been told to stay home, not go to restaurants, movies, travel, etc. Illustrate the kind of shock you think this can give to the economy. Explain in one sentence why the curve(s) is/are shifting. Mark the new equilibrium Y2, P2. (Note: many things have happened lately, so we could see all sorts of effects, but focus on the effect of people cutting down on eating out, traveling and shopping.)

c.What did the Federal Reserve do to interest rates on March 15? You can find the answer if you go to the Federal Reserve website that shows an overview of meetings for the FOMC, the part of the Federal Reserve that determines monetary policy. (in 1 sentence) https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

Scroll down to March 15 meeting statement, where the committee describes what they did to interest rates (called the federal funds rate) and why on this date.