3. Aggregate Supply and Demand (20 points). Unlike aggregate demand, we distinguish between short-run and long-run aggregate supply. Short-run aggregate supply (SRAS) is a horizontal curve whereas long-run aggregate supply (LRAS) is vertical. a.) In our model of aggregate supply and demand, we distinguish between short-run and long-run aggregate supply. In the short run, what variable can firms adjust and what variable is fixed? In the long run? b.) Plot the short-run aggregate supply curve, the long-run aggregate supply curve, and the aggregate demand curve below. Be sure to label the y- and x-axes. c.) Suppose the Federal Reserve expands the money supply. In the short run, what is the impact on aggregate demand? Show on your graph above. What happens to the price level and to output in the short run? d.) In the long run, firms adjust to the new money supply. What effect does this have on output and prices? Show on your graph above