you are to illustrate the economy with the appropriately shaped AD-AS curves. Unless explicitly stated otherwise, make the assumption that the economy is at full-employment (Y = Yn). In each case, draw the shift(s) in the AD-AS curves which result from the exogenous actions taken and indicate in the space provided whether each variable will increase (+), decrease (-), remain unchanged (0), or have ambiguous sign (?). Please, number the curves so that the direction of each shift will be clear. Mark the original equilibrium by E1 the next one by E2 and so on. Unmarked graphs will be discounted in credit. Variables: P is the price level, Y is income, i is nominal interest rate, r is real interest rate, U is unemployment, Inf is inflation, I is investment, and BD is budget deficit.

2. Government increased social spending. OPEC increased oil prices. What are the short-run and the long-run effects of the policy and the event on the following economic variables? Long-Run P 1 Short-Run Y: P: i: r: | U: Inf: I: BD : Y 2. Government increased social spending. OPEC increased oil prices. What are the short-run and the long-run effects of the policy and the event on the following economic variables? Long-Run P 1 Short-Run Y: P: i: r: | U: Inf: I: BD : Y