3. [10 points] Let us consider the country of _a closed economy that starts off in a long-run equilibrium. Recently two things have happened in this country: ill the central bank decides to pursue a more expansionary monetary policy {i.e.. they increase the growth rate of moneyllower interest rates}. and (2} new tax laws make big capital investments by companies more attractive. a} [4 points) Draw the AD-AS diagram like we did in class. Label the initial long-run equilibrium starting point. [You should have three curves on your diagram] In the short-run, indicate how these two shocks would shift the curves in the diagram as well as what you predict would happen (again in the short run} to the level of GDP and the price level. b} {4 points} Assume that the changes described in the set-up to the problem persist for a long period of time, that there are no other shocks, and that the extra investment doesn't actually change long-run aggregate supply. In the long run. what will happen to real GDP and to prices? Indicate the results on your diagram. c} {2 points} In the VERY long run (hint: Solow model!), how will these changes effect the steady state level of output per capita? How will these changes effect the growth rate of output per capita? Why