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4. Assume the simplified equation of the SRAS is P=3+1.5*Y , while the equation of the AD curve is P=5-0.5Y . Let us assume, that

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4. Assume the simplified equation of the SRAS is P=3+1.5*Y , while the equation of the AD curve is P=5-0.5Y . Let us assume, that initially, the crossing of the two curves is the long run equilibrium. a) If the AD curve shifts downwards by half a unit, what will be the equilibrium price level in the third period? (taking initial LR eq. as the first period). (10) b) What is the level of output in the fourth period? (10) c) What is the new long run level of output and prices? (5)Assume the simplified equation of the SRAS is P = 3 + 1.5 Y, while the equation of the AD curve is P = 5- 0.5Y. Let us assume, that initially, the crossing of the two curves is the long run equilibrium. a) If the AD curve shifts downwards by half a unit, what will be the equilibrium price level in the third period? (taking initial LR eq. as the first period) . (10) b ) What is the level of output in the fourth period? (10) c) What is the new long run level of output and prices? (5) DO NOT USE ANY AI

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