IS-LM and AS-AD Anti-trust laws are statutes aimed at reducing monopoly power. Suppose that Congress relaxes anti-trust

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IS-LM and AS-AD
Anti-trust laws are statutes aimed at reducing monopoly power.
Suppose that Congress relaxes anti-trust laws and make it easier
for monopolies to be formed. As a result firms are able to charge
higher prices for their products.
a. Use both the IS-LM and AS-AD models to graphically illustrate
the effect of the relaxation of antitrust laws in the short and
long run. Be sure to label the axes, curves, use arrows to show
shifts in curves, and mark the equilibrium points: “A” for initial
equilibrium; “B” for the short- run equilibrium, “C” for the
long-run equilibrium. Assume that the SRAS curve is horizontal and
that the U.S. economy was initially at full equilibrium output
before the relaxation of anti-trust laws.
b. Using your graphs from Part (a) determine what would happen
to the following variables in the short-run compared to their
initial levels. Did the following variables increased, decreased or
did they remain unchanged in the short run? No explanation is
required. (i) output: (ii) price level: (iii) interest rate: (iv)
investment: (v) consumption: (vi) unemployment:
c. Using your graphs from Part (a) determine what would happen
to the following variables in the longrun compared to their initial
levels. . Did the following variables increased, decreased or did
they remain unchanged in the long run? No explanation is required.
(i) output: (ii) price level: (iii) interest rate: (iv) investment:
(v) consumption: (vi) unemployment: