What happens when bad aggregate demand shocks hit the economy? Consider the following graph: Inflation A rate (TT) LRAS SRAS (exp. inflation = 6%) 6% AD = M + 1=10% Solow Real GDP growth rate growth rate a. Before we get to the bad aggregate demand shock, find the potential growth rate in this economy. b. Because of a fall in the growth of the money supply, spending growth fells to 5% per year. If this fall in money growth lasted for many years and made workers, business owners, and consumers adjust their inflation expectations enough so that the economy returns to the potential growth rate, what will the potential growth rate be in the long run? What will inflation be in the long run