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For each of the following, use the AD-AS diagram to show the short-run and longrun effects...

For each of the following, use the AD-AS diagram to show the short-run and longrun effects on output and inflation (assuming “self-correction”, i.e. no “stabilization policy”). Assume that the economy starts in long-run equilibrium.

a) The government reduces taxes.

b) The Fed tightens monetary policy.

c) Oil prices drop sharply and unexpectedly.

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