Section 2 4) Suppose that a wave of pessimism suddenly overtakes the economy, and households (20pts) decide to cut back on their spending and delay major purchases to save a larger share of their income. a. What are the implications of this wave of pessimism on the economy? Use the AS-AD model to depict the impact of this event on the economy. b. How can the government use monetary policy to return the economy to equilibrium? Use the AS-AD graph to answer this question. c. Describe the algorithm that motivated your answer in part (b). Verdana 11pt BI YA Tx *