Consider an economy that is in equilibrium with output equal to \(Y^{*}\). There is then a significant reduction in the world price of an important raw material, such as iron ore. (Assume that this country produces no iron ore domestically.)

a. Illustrate the initial equilibrium in a diagram.

b. What kind of shock occurred-aggregate demand or aggregate supply? Show the effects of the shock in your diagram.

c. Explain the process by which the economy will adjust back toward \(Y^{*}\) in the long run. Show this in your diagram.

d. Is there a strong case for using a fiscal contraction to return output to \(Y^{*}\) ? Explain why or why not.