d)According to the IS-MP-AD-IA model, what would happen to output and inflation over time? Draw a diagram to help explain your answer.
e)What would happen to the AD-IA and IS-MP diagrams in the long run? Draw those diagrams to explain your answer. If consumer and business confidence did not recover for many years, what would be the long-run effect of those declines on output, inflation, and the real interest rate?
f)What would be the long-run effect of the shock on consumption and government purchases? What is the long-run effect of the shock on investment? (You might think the effect on investment would be ambiguous, but you can use the fact that Y = C + I + G in the long run to determine what the net effect on I must be.)