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The following AD-AS diagram is only for the questions 13-16 only. P LRAS SRAS SRAS2 B A SRAS, D AD Y Y 13. In the

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The following AD-AS diagram is only for the questions 13-16 only. P LRAS SRAS SRAS2 B A SRAS, D AD Y Y 13. In the graph above, assume that the economy is currently in point B. In this situation, if the government does not take any policy measures to bring the economy to the full-employment level of output Y , the economy will move toward in the long run. A. point C B. point A C. point D D. point E 14. (Continue to use the above graph) Again, assume that the economy is currently in point B. Now, the Fed wants to stabilize the output (that is, maintain the output at the full-employment level Y ) by conducting monetary policy. Then the new equilibrium output will be at A. point A B. point B C. point C D. point D E. point E 15. (Continue to use the above graph) Now assume that the economy starts at point A and there is a favorable supply shock. In this situation, point_ _ represents short-run equilibrium and point represents long-run equilibrium in the absence of government intervention. A. B; C B. B; A C. E; A D. E; D 16. (Continue to use the above graph) Assume that initial equilibrium (before the supply shock) is point A. Now faced with the favorable supply shock, the Fed wants to stabilize the output (that is, maintain the output at the full-employment level Y ) by conducting monetary policy. Then the new equilibrium output will be at A. point A B. point B C. point C D. point D E. point E

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