Long question (25 points) In this question, we analyze the economy when the nominal interest rate becomes zero (called a liquidity trap) using the IS-LM framework. We assume that prices are fixed during the economic events considered in this question (i.e., we focus on the short run). For simplicity, we assume the expected inflation rate is 0. For the following questions, please label the original equilibrium point A, indicate the directions in which the curves shift, and label the new equilibrium point B. Your answers must be no more than 5 sentences excluding graphs. (1) (5 points) Suppose the economy is in a general equilibrium with a positive interest rate initially. Due to the spread of COVID-19, households become pessimistic about the prospects of the economy and the stock market crashes, causing the economy to enter a liquidity trap. Show how the IS/LM/FE curves shift in the IS-LM diagram and explain how and why those curves shift. [Max 5 sentences] (2) (5 points) Assume the economy is in a liquidity trap as in question (1). Suppose the central bank increases money supply. What is the effect of this policy on output today? Show how the IS/LM/FE curves shift in the