Question 3 (27 marks total) Suppose that the industries of an economy heavily rely on the inputs of agricultural products. The economy is initially in long-run equilibrium. Favorable weather conditions increase the output of the agricultural sector and reduce firms' costs in the short-run. a) b) c) d) Use the AS-AD model to illustrate and explain the short-run impact of the change on the price and output of the economy (assuming no monetary or fiscal policy is in effect in the process). Illustrate your answer in an AD-AS diagram. (6 marks) How would the economy adjust in the long-run? Use the sticky-wage theory to explain the adjustment in output and price (assuming no monetary of fiscal policy is in effect in the process). Illustrate your answer in a separate AD-AS diagram. (6 marks) Suppose, alternatively, that the central bank pursues a monetary policy that achieves stable price, 1.e., the central bank constantly adjusts the money supply so as to keep the price level unchanged. Answer Part a) again under this alternative assumption. Illustrate your answer in a separate AD-AS diagram. (7 marks) Answer Part b) again under the alternative assumption stated in Part c). [llustrate your answer in a separate AD-AS diagram. Further, do you think such a monetary policy amplifies or dampens the change in real output? Explain based on the diagram drawn for this part. (8 marks)