The diagram below shows a simple AD/AS diagram. The economy begins in long-run equilibrium at E0 with real GDP equal to Y*. At E0, the unemployment rate is 6 percent. What type of unemployment is this, and how do you know? (2 points) A negative aggregate supply shock now shifts the AS curve to AS?. At E1 the unemployment rate is 7.5 percent. What type of unemployment at E1? How much? Please provide the reason behind your answer. (3 points) If monetary and fiscal policy do not react to the shock, describe the economy's adjustment process to its new long-run equilibrium. Please explain step-by-step changes taking place on the diagram. (3 points) What is the unemployment rate at the economy's new long-run equilibrium? What kind of unemployment exists there? Explain. (2 points)

The diagram below shows a simple AD/AS diagram. The economy begins in long-run equilibrium at 60 with real GDP equal to Y*. AS' AS Price Level Fo AD Y' Real GDP a. At EO, the unemployment rate is 6 percent. What type of unemployment is this, and how do you know? (2 points) b. A negative aggregate supply shock now shifts the AS curve to AS'. At E1 the unemployment rate is 7.5 percent. What type of unemployment at E1? How much? Please provide the reason behind your answer. (3 points) c. If monetary and fiscal policy do not react to the shock, describe the economy's adjustment process to its new long-run equilibrium. Please explain step-by-step changes taking place on the diagram. (3 points) d. What is the unemployment rate at the economy's new long-run equilibrium? What kind of unemployment exists there? Explain. (2 points)