8. Economic fluctuations I The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose a stock market boom Increases household wealth and causes consumers to spend more. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. 240 O 200 AS AD 160 AS PRICE LEVEL 120 80 AD 40 0 200 400 600 800 1000 1200 OUTPUT (Billions of dollars)In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to V the price level people expected and the quantity of output to V the natural level of output. The stock market boom will cause the unemployment rate to V the natural rate of unemployment in the short run. Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $600 billion, prior to the increase in consumption spending associated with the stock market expansion. Along the transition from the short run to the long run, price-level expectations will V and the '7 curve will shift tothe 'l" . Using the graph, illustrate the long-run impact of the stock market boom by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions. 240 O AS 200 AD 160 AS PRICE LEVEL 120 80 AD 40 0 0 200 400 600 800 1000 1200 OUTPUT (Billions of dollars)In the long run, due to the stock market boom, the price level V, the quantity of output the natural level of output, and the unemployment rate the natural rate.7. Determinants of aggregate supply The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS, to AS2, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion.200 175 AS 150 AS 125 100 PRICE LEVEL 75 50 25 0 0 50 100 150 200 250 300 350 400 QUANTITY OF OUTPUTThe following table lists several determinants of short-run aggregate supply. Complete the table by selecting the changes in each scenario necessary to Increase short-run aggregate supply. Change Necessary to Increase AS Regulations on the rm 7 Tax rates 7 Input prices 7