(a) An economy is currently operating in a recession. Draw a graph of its short-run aggregate supply, aggregate demand, and long-run aggregate supply. Label the equilibrium price level, the real output level, and the full-employment output Y_F.

(b) If the natural rate of unemployment in this economy is 5 percent and its cyclical unemployment is 4 percent, what must be its actual unemployment rate?

(c) Draw a new graph that shows an economy operating with an inflationary gap. Include the SRAS, AD, and LRAS. Label the equilibrium price level, real output level, and full employment output Y_F.

(d) The economy in part (c) is in short-run equilibrium. If the aggregate quantity of output demanded in this economy is $5 trillion, what must the aggregate quantity of output supplied?

(e) What must happen to this economy's unemployment rate as it moves to long-run equilibrium? Explain.