3. Suppose we have the following that describes the economy:

IS: Y = 12 - r

MP: r = 1 + .5

SRAS: = ^e + (Y - Y^P) +

Given: ^e = 2, = 1, Y^P = 10, = 0

What is the equilibrium output, r, and ?

Now suppose that the IS curve changes and is now:

IS': Y = 13 - r

1.What could cause such a change in the IS curve?

2.Find the new equilibrium output, r, and ?

3.Is this new equilibrium a long-run equilibrium? Why or why not?

4.Now find the long-run equilibrium output, r, and ?

I am only confused by calculating question 4. Please include explanation and relevant calculation process so that i can fully understand. Thank u!!!