Using both the IS-LM and AD-AS diagram, explain what happens to the economy in the short run when people become pessimistic about the economy. What will happen to output and the real interest rate? Please provide figures with corresponding explanations (please label the variables and direction of shift of curves clearly).

Consider an economy like Argentina in 2001. Due to rampant corruption from the government, massive tax evasion, and money laundering activities, both consumers and investors become very pessimistic about the Argentine economy. Suppose initially, the economy is in a long run equilibrium