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Question 3 (26 marks) Assume that the economy starts at the natural level of output. Now suppose there is a decrease in business condence. In AS-AD and IS-LM diagrams, jointly show the effects of the decrease in business condence in the short run and the medium run. Explain why the curves shift in your diagrams. What happens to output, the interest rate, and the price level in the short run? What happens to consumption, investment in the short run? What happens to the variables listed in part (b) in medium run equilibrium compared with the value in (b). Now suppose there is a simultaneous decrease in business condence and decrease in the minimum wage. d. In WS-PS diagrams, explain the effects of this decrease in the minimum wage on the labour market and the equilibrium real wage. In AS-AD and IS-LM diagrams, jointly show the effects of these changes in the short run and the medium run. Explain why the curves shift in your diagrams. What happens to the output, the interest rate and the price level, investment in the medium run