Part 1: Long-Run Self Adiustment- Draw a correctly labeled graph of aggregate demand, aggregate supply, and longrun aggregate supply. Start each graph at full employment. Show what happens in both the shortrun and the longrun if the economy is given time to selfadjust. 1. Consumer spending increases as 2. Congress passes a bill dramatically consumers confidence increases reducing government spending L L Part 2: The PhilliEs Curve- Draw a correctly labeled ADi'AS graph and a correctly labeled Phillips curve graph showing an economy with a recessionary gap. Label the initial equilibrium on both graphs point "A'. L L 3. Suppose that policymakers increase government spending resulting in full employment. Show the result this scal policy action on both graphs. Label this new equilibrium point "B". Identify what happens to inflation and unemployment in the shortrun. 4. Suppose that policymakers now out consumer taxes resulting in a positive output gap. Show the result of this fiscal policy action on both groups. Label the new equilibrium point "C. identify what happens to employment in the shortrun. 5. At point \"C' what will happen to wages and resources prices in the longrun? Explain