Go to the Web site of the Federal Reserve Bank of St. Louis (FRED) (research.stlouisfed.org/fred2/) and find data on real GDP (GDPCA) and the GDP price deflator (USAGDPDEFAISMEI) for 1960, 1973, 1975, and 2007.

a. In an AD-AS graph, using the actual values for real GDP and the GDP price deflator, show equilibrium for 1960 and for 2007. Assume that the economy was at equilibrium at potential GDP in both years. From 1960 to 2007, what happened to long-run aggregate supply? Given the change in the GDP implicit price deflator, did aggregate demand grow more or less than long run aggregate supply?

b. In an AD-AS graph, using the actual values for real GDP and the GDP price deflator, show equilibrium for 1973 and for 1975. Assume that the economy was in equilibrium at potential GDP in 1973 but in only a short-run equilibrium in 1975. Given the changes in real GDP and the GDP implicit price deflator, briefly explain what happened to short-run aggregate supply from 1973 to 1975.