Problem 9: Use the aggregate demand/aggregate supply framework to answer the following questions (a) A sharp decline in the stock market due to an increase in corporate bankruptcies leads to a decline in consumer and business confidence. What effect would you expect this shock to have on output and inflation in the short-run? (b) The US government decides to lower military expenditures to reduce the budget deficit. What effect would you expect this shock to have on output and inflation in the short- run? (c) State and local governments increase infrastructure spending on highways and bridges boosting potential output. What effect does this shock have on output and inflation in the short-run? What effect does this shock have on output and the inflation in the long-run if monetary policy does not respond? (d) A surge in violence in the Mideast causes a temporary spike in global oil prices. What effect would you expect this shock to have on output and inflation in the short-run? (e) A temporary tax rebate is enacted by Congress in an effort to boost reelection prospects. What effect would you expect this shock to have on output and inflation in the short- run