1. Begin your graph at AD-SAS-LAS equilibrium and answer the 2 questions:
2. What initially happens to price and output in the Short-run according to the scenario? Apply the changes to AD, SAS, LAS (if any) and label recessionary gap or inflationary gap on your graph.
3. What could happen in the long run if the economy is allowed to adjust back to its nature rate (allowed to self-correct without government intervention)? Show the changes on your graph and indicate price, output level and new LR equilibrium.
4. Fueled by a surge in consumer spending and residential and business investment, GDP exploded at a 33.1% growth rate.