Solution about Consider an economy that is initially in long run equilibrium. For each of the changes listed below, analyze short-run and long-run effects on: 1. the equilibrium level of real GDP; 2. the equilibrium level of nominal GDP; and 3. the equilibrium level of unemployment. In each case, draw a diagram and include an explanation as to why the curves shift as they do.

a. Consumers, coming to fear that the government will not provide for them in their old age, increase their saving.

b. Pessimism about future economic performance causes businesses to reduce domestic fixed investment.

c. In a quest for re-election, the president pushes for more tax cuts.

d. A fall in the price of oil used in production