Suppose the economy had been operating at its potential level of real GDP in the past, buta sudden increase in wealth causes consumer spending tosuddenly and substantiallyincrease.The increaseis expected to last for a significant period of time. Use AD/AS model.

1. Show these changes on the diagram. Marks will be deducted for incomplete, missing and inaccurate labels.
2. What short-run impact would the event have on the economy's [i] price level, [ii] level of real GDP, and [iii] unemployment rate [i.e. increase, decrease, no effect, indeterminate]
3. Describe the appropriate monetarypolicy that could be used to correct the situation outlined at the start of the question.
4. Use an appropriate diagram to illustrate the impact on the economy of the monetary policies youhave described.
5. When compared to the economy's position prior to the use of such policies,what specific impactwould the monetary policy have on the economy's[i.e. would there be an increase, decrease, no effect, or is the outcome indeterminate]?

[i] price level

[ii] level of real GDP

[iii]unemployment rate