Consider an economy that is in equilibrium at point Ex, with output equal to Y*. There is then a significant reduction in the world's demand for this country's goods. 1 y* a. This means that an aggregate demand shock occurred. 1.) Use the line drawing tool to plot and label the effects of the shock in your diagram. ASO 2.) Using the point drawing tool, plot and label the new short-run equilibrium after this AD shock. Carefully follow the instructions above, and only draw the required objects. Price Level (P) b. The economy will adjust back toward Y* in the long run by bringing - ADo c. Policymakers may want to use a fiscal expansion to restore output back to Y* rather than wait for the long-run adjustment because of Real GDP (Y)