Question: 6. Aggregate supply shocks and the medium run. Suppose the economy begins in equilibrium. Then, the government introduces a Universal Basic Income program. For simplicity

begins in equilibrium. Then, the government introduces a Universal Basic Income program.

6. Aggregate supply shocks and the medium run. Suppose the economy begins in equilibrium. Then, the government introduces a Universal Basic Income program. For simplicity let's assume this program has only one effect. It reduces the rate of unemployment, since many long-term unemployed workers permanently leave the labor force. a. Using the IS-LM characterize the short-run effects of this policy. b. What happens to output, the interest rate, and the price level in the medium run? What happens to consumption and investment in the medium run

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