4) Suppose the economy is in a long-run equilibrium a)Draw the economy’s short-run and long-run Phillips curves b) Suppose a wave of business pessimism reduces aggregate demand .Show the effect of this shock on your diagram from part a .If the Fed undertakes expansionary monetary policy,can it return the economy to its original inflation rate and original unemployment rate? c)c) Now suppose the economy is back in long-run equilibrium and then the price of imported oil rises.Show the effect of this shock with a new diagram like that in part a .If the Fed undertakes contractionary monetary policy, can it return the economy to its original inflation rate and unemployment rate? Explain why this situation differs from that in part b.

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