Question 'I: Macroeconomic Adjustments to Economic Shocks Price LRAS level 53/132 SRAS1 # _ P3 ....................... C l a P2 p, l ............................................... A AD2 _.. AD1 GDP, GDP2 Real GDP Refer to the diagram above to answer the questions below: a) Is the economy in long-run macroeconomic equilibrium at point A? Explain. (2 marks) b) Explain a factor other than a large increase in demand for exports on why the Aggregate demand (AD) curve shifts to the right from AD1 to AD2. (2 marks) c) What happens to unemployment and price level at point B when compared to point A? (2 marks) d) Explain how does the economy eventually adjusts back to long run equilibrium to point C? Also, comment on what happens to real GDP, unemployment and price level as point C when compared to point A. ( 3+ 3 = 6 marks)