Question 3 0-3 ' 2 P\" "iii 37:33:55.!!!3 'EEEEEEEigiiiii Consider the above graph that pertains to a country. It shows the AD, LRAS, and SRAS functions for that country. The MPC in this country is 0.75 and the Okun's alpha is 10 (remember this thing?) Assumes that a recession comes because business rms become pessimistic about future prot conditions. As a result investment spending decreases by 1,000 units causing the AD function to shift byl 4000-00 l units. In the short run, the ination rate will equal| 4-00 l percent and a cyclical unemployment of 4'00 l percent will arise in the labor market. If the Fed does not take any action and the recession turns out to be longlived. the inflation rate will change overtime and will equal l 0-00 l percent in the long run. However, if the Fed recognizes the severity of the problem and acts quickly, the inati on rate will go back to its target rate ofl 8-00 | percent