Recall our discussion of the long-run AD-AS model.a) (3 poin…
Recall our discussion of the long-run AD-AS model.a) (3 points) In the long-run, is fiscal or monetary policy effective? Explain.b) (6 points) Use a diagram of the long-run AD-AS model to show what happens when Aggregate Demand increases without any change in Aggregate Supply. What happens to real output? The price level?c) (6 points) Use a new diagram of the long-run AD-AS model to illustrate economic growth. Which curve(s) must shift to sustain long-run growth? Which is most important for long-run economic growth: increases in productive capacity or spending?