Using the model with aggregate demand, short-run aggregate supply and long-run aggregate supply curves, explain briefly how each of the following transitory shocks will affect the economy. Describe if it is a demand or a supply shock, and in each case describe the short-run effects on the aggregate price level and aggregate output, as well as the self-correction mechanisms and long-run effects. Illustrate with diagrams.

1. To reduce the budget deficit, government announces higher taxes on households starting next year with no corresponding change in government purchases.
2. There is a decrease in households' wealth due to a decline in the stock market and housing prices.
3. There is an increase in quantity of money.
4. There is an increase in government spending.
5. The government increases transfer payments to families with dependent children.
6. Solar energy firms launch a major investment spending.
7. Greater union activity increased the minimum nominal wage and legally mandated retirement benefits paid to workers.
8. Severe weather conditions destroy the crops around the world.