Section 2: Model Assumptions and Resultant Outcomes [200 word maximum]

The 2 models you have used have different underlying assumptions.

Outline the major underlying difference(s) between the two models.

Briefly discuss and illustrate how thedifference(s) in the model assumptions impact the degreeof the potential impact on the economy. Use the AD-AS Model and provideONEdiagram to illustrate the potential difference in outcomes depending on the assumptions made. (Hint - consider the assumptions underlying the AE model - what SRAS curve reflects this?)