we can use the macroeconomic model to analyze the changes to real GDP (Y), unemployment (u) and price level (PL) as a result of some event Draw the macroeconomic model at equilibrium Label the axis and curves correctly PL, GDP, AD, SRAS, LRAS Also, correctly label the equilibrium PL, Y and u (20 Points) Assume a drought severely lessens the corn harvest Since corn has many uses including livestock feed and ethanol for gas, this drought causes a short term decrease in aggregate supply (SRAS) This is a negative supply shock Graph the shift in the curve and the new PL, Y an U in the short run (14 Points) Would a drought that negatively impacted the corn harvest increase or decrease output (Y) in the short run (12 points) Would it increase or decrease unemployment (u) in the short run (12 points) Would it increase or decrease the overall price level in the economy in the short run (12 points) What would happen to Y, u and PL in the long run (10 points)

Question: we can use the macroeconomic model to analyze the changes to real GDP (Y), unemployment (u) and price level (PL) as a result of some

we can use the macroeconomic model to analyze the changes to real GDP (Y), unemployment (u) and price level (PL) as a result of some event.

Draw the macroeconomic model at equilibrium.Label the axis and curves correctly - PL, GDP, AD, SRAS, LRAS. Also, correctly label the equilibrium PL, Y* and u*. (20 Points)
Assume a drought severely lessens the corn harvest. Since corn has many uses including livestock feed and ethanol for gas, this drought causes a short-term decrease in aggregate supply (SRAS). This is a negative supply shock.
2. Graph the shift in the curve and the new PL, Y an U in the short-run (14 Points)
4. Would a drought that negatively impacted the corn harvest increase or decrease output (Y) in the short-run? (12 points)
6. Would it increase or decrease unemployment (u) in the short-run? (12 points)
8. Would it increase or decrease the overall price level in the economy in the short-run? (12 points)
10. What would happen to Y, u and PL in the long-run? (10 points)

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