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In this question we will reflect on the Australian fires from last year. A wide part of Australia has experienced severe fires in the last year, which made the economy much less productive and had severe impacts on business activities. a) Explain why you could expect negative shifts in the aggregate demand curve following the fires. What would you expect are the drivers of this shift? Reflect on each of the components of the aggregate demand and comment on whether they are likely to change due to the fires. [6 marks] b) Explain why you could expect negative shifts in the aggregate supply curve following the fires. What would you expect are the drivers of this shift? Reflect on each of the components of the aggregate supply and comment on whether they are likely to change due to the fires. [6 marks] c) Show the shifts discussed in parts a) and b) graphically. You may assume an upward sloping AS curve for simplicity. Can you predict what happens to real GDP and the price level? [8 marks] d) The fires in Australia can also be considered a decrease in the country's stock of capital. You may use the Solow model to show what happens when capital decreases and what the model predicts for the new growth rate. Are these con- sequences likely to happen in practice? [10 marks]