a.Assuming the Australian economy was in long-run equilibrium in early 2020.In the first quarter of 2020, Australia experienced short-run supply chain disruptions due to the strict lockdown and the SRAS curve shifted to the left.This is also followed by a fall in aggregate demand due to a fall in consumption and investment, causing the AD curve to shift to the left.

(i)Draw the basic (static) aggregate demand and aggregate supply model to illustrateand to explain what happens in the short-run real GDP, the price level and the unemployment rate when the economy suffers a supply shock, and

(ii)Use the basic (static) aggregate supply and demand model to illustrate and explain what happens in the long-run real GDP, the price level and the unemployment rate following this supply shock.