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In the AD-AS model, a temporary shock to the aggregate supply function that leads to a decrease in inflation, with other things equal, will have what effect? O A positive effect on output in the short run and long run O A negative effect on output in the short run and long run A positive effect on output in the short run but no long-run impact on inflation or output A negative effect on output in the short run but no long-run impact on inflation or outputConsider an AD-AS model with AD curve Y - Y* = -ay(7 - 7* ) + ED and AS curve TT = Te + B(Y - Y*) + Es with parameter values a = 2, y = 2, 0 = 1, B = 1, and with inflation target 7* = 0.02 and potential output normalised to Y* = 1. Starting from a long-run equilibrium with Tre = 7* suppose there is a temporary demand shockED = 0.05 . Which of the following is FALSE? O In the short run, inflation is 3% O In the short run the real interest rate rises O In the short run, output is 5% above trend O There is no long-run increase in outputConsider a closed economy. Household saving is $300, business saving is $400, government purchases are $1000, government transfers and interest payments are $500, government tax collections are $1300, and GDP is $5000. What is the fiscal deficit? O $0 O $1000 O $800 O $200Consider the production function Y : AKL where A is a positive constant, K is physical capital and L is labour. Which of the following is FALSE? 0 The marginal product of capital is constant and equal to AL 0 There are increasing returns to scale C) The marginal product of labour is constant and equal to AK 0 None of the other options