4. Use the following Aggregate Supply Aggregate Demand diagram as a starting point for your analysis. Y(real) Label the curves. The Government decides to increase payroll taxes in order to improve the finances of the social security system. What will happen to the short-term output and price level of the economy? c. Nominal wages rise by 4%, while labor productivity rises by six percent. What will happen to the short-term output and price level of the economy? c]. As a result of bank failures in Spain and the inability of the Italian government to borrow money at low rates to fund its government debt, economic activity sharply declines throughout the Euro zone. What will happen to the short-run output and price level of the American economy? P'F