Problem

1. Explain how the short-run and long-run equilibrium levels of output and the price level were affected by the Blue Eagle program, using AS-AD analysis.
2. Illustrate how this works by drawing a diagram of LRAS (long-run aggregate supply), SRAS (short-run aggregate supply) and AD (aggregate demand) on a piece of paper, using "point A," "point B," etc., like the graphs in the text book. Show the impact of passage of the legislation behind the Blue Eagle program on the price level and GDP.