Question 4 (12.5 marks) (a Country A is in long-run equilibrium. Suppose that an economic boom overseas causes foreigners to buy more goods from Country A. (i) Explain its impacts to AD, SRAS and LRAS. (2 marks) (ii) Use an AD-AS diagram to illustrate what happens to output and the price level in the short run. (2 marks) (iii) Explain how the economy would move from the short-run to the long-run equilibrium. (2.5 marks) (b) Country B also begins in long-run equilibrium. Suppose that an earthquake has devastated many of the infrastructures of Country B. Draw an AD-AS diagram to show the new long-run equilibrium. (i) Explain its impacts to AD, SRAS and LRAS. (1.5 marks) (ii) Use an AD-AS diagram to show the new long-run equilibrium. (2.5 marks) (iii) Suppose afterwards there is a sharp decline in the stock market. Explain whether this would make the economy to enter into a period of recession. (2 marks)