Question 2 Next, we will analyse the short-run equilibrium. Short-run equilibrium output is initially at the LRAS level (Y : 1000). a. Explain how the short-run values of (1', i) are determined before the medicine news shock. [3 marks] b. Which, if any, of the graphs from Appendix C best depict the change in the Keynesian cross due to the medicine news Shock? Explain. [3 marks] c. Which, if any, of the graphs from Appendix A best depicts the short-run change in the interest rate(s) due to the medicine news shock? Explain. [3 marks] d. Which, if any, of the graphs From Appendix B best depicts the short-run change in output and price due to the medicine news shock? Explain. [3 marks] e. What are the effects of the shock on the short-run equilibrium values of output Y, consumption C, investment I, real interest rate 'r and price P? Fill in the following table that denotes the change in each of the variables. There are 6 blanks to ll. You can use exact fractions, or if using a calculator round up to 1 decimal place. (For interest rates, you need to write, for example, 1.1%, and not just 1%.) AY AC AI Ar(%) Az' (%) AP change: [18 marks] C = 100 + 0.5 . (Y -T) I = 340 - 1000 - r where Y is real output and r is the real interest rate. Government purchases and taxes are G = 150, T = 100. The LM curve (money market equilibrium) curve is M Y P = 22 where P is the price level and i is the nominal interest rate. The Central Bank (CB) is initially supplying M = 5000 units of money, and expected inflation is re = 0.03. Assume that the long-run equilibrium level of output is Y = 1000. Short-run equilibrium output is initially at the same level (Y = 1000). Suddenly, news of a new oral Covid medicine raises expected inflation to * = 0.08