• All answers are to be typed, including any calculations.
• Answers should be given in a paragraph form that provides a thorough explanation. A one sentence answer is not adequate. Even in the case of calculations, they should be explained.
• Graphs are to be neatly hand drawn.
• Graphs are to be clearly labeled
• Graphs are to be inserted into the paragraph of the answer

The answer to the questions DO NOT require outside research. Answering the questions will allow you to show the knowledge you have gained this semester. Supporting your answers is key.

1. Inflation is increasingly becoming a concern among economists. One of the heads of Bank of America has predicted that consumer prices will increase by 8% by the end of 2021. Using the AD/SRAS/LRAS graph show how inflation will effect the AD curve. (Start the graph at the macroequilibrium point and show the changes)

2. In the graph that you have drawn in question 1, what is the state of the economy? Using fiscal policy,explainhow would you bring the economy back to the macroequilibrium point.

3. In the graph that you have drawn in question 1, what is the state of the economy? Using monetary policy, explain how would you bring the economy back to the macroequilibrium point.