Topic / Assignment 3. Problems and Applications Q4 Suppose the economy is in a long-run equilibrium, as shown on the following graph. Now suppose a fall in government purchases reduces aggregate demand. On the following graph, shift a curve or adjust the point to reflect the short-run effect of reduction in government purchases. LRPC O SRPC O Short-Run Effect Inflation Rate LRPC SRPC Unemployment RateTopic 7 Assignment Inflation LRPC SRPC Unemployment Rate True or False: If the Fed undertakes expansionary monetary policy, it can return the economy to its original inflation rate and original unemployment rate. O True O False Now, suppose the economy is back in long-run equilibrium, and then the price of imported oil rises. On the following graph, shift a curve or adjust the point to reflect the short-run effect of the increase in the price of oil. LRPC O SRPCTopic 7 Assignment Now, suppose the economy is back in long-run equilibrium, and then the price of imported oil rises. On the following graph, shift a curve or adjust the point to reflect the short-run effect of the increase in the price of oil. LRPC O SRPC Short-Run Effect Inflation Rate LRPC SRPC Unemployment Rate True or False: If the Fed undertakes expansionary monetary policy, it can return the economy to its original inflation rate but the unemployment rateLRPC O SRPC O Short-Run Effect Inflation Rate O LRPC SRPC Unemployment Rate True or False: If the Fed undertakes expansionary monetary policy, it can return the economy to its original inflation rate but the unemployment rate will be higher. O True O False Save & Continue Continue without saving