1. Government Restriction:Suppose the economy is initially in the long-run equilibrium. Assume further for simplicity long-run aggregate supply curve is fixed.Concerns about pollution cause the government to significantly restrict the production of electricity.

a.Which curve shifts in which direction?

b.Aggregate demand curve shifts right.

c.Aggregate demand curve shifts left.

d.Short-run aggregate supply curve shift right.

e.Short-run aggregate supply curve shifts left.

2.Suppose the economy is initially in the long-run equilibrium. Assume further for simplicity long-run aggregate supply curve is fixed.Concerns about pollution cause the government to significantly restrict the production of electricity.

Suppose policy makers respond to the government restriction.To stabilize real GDP, the Fed should

a. use expansionary monetary policy.

b. use contractionary monetary policy.

c. use expansionary fiscal policy.

d. use contractionary fiscal policy.

Suppose the economy is initially in the long-run equilibrium. Assume further for simplicity long-run aggregate supply curve is fixed.Concerns about pollution cause the government to significantly restrict the production of electricity.

How is the new long-run equilibrium different from the original one without government intervention?

a. the price level and real GDP are higher.

b. the price level and real GDP are lower.

c. the price level is permanently higher and real GDP is the same.

d. the price level and real GDP are the same.

Suppose the economy is initially in the long-run equilibrium. Assume further for simplicity long-run aggregate supply curve is fixed.Concerns about pollution cause the government to significantly restrict the production of electricity.

Suppose policy makers respond to the government restriction to stabilize the economic fluctuation. How is the new long-run equilibrium different from the original one with the government intervention (monetary or fiscal policy)?

a. the price level and real GDP are higher.

b. the price level and real GDP are lower.

c. the price level is permanently higher and real GDP is the same.

d. the price level and real GDP are the same.