Answer Happy

Explain what will happen as a result of the following events. In each case, draw an aggregate demand and short-run aggregate supply diagram showing the initial equilibrium output level (Y) and price level (Po). Show any changes and indicate the final equilibrium output level and price level. A. The economy is operating near full capacity. Now environmental pollution standards are tightened substantially. B. The economy is operating near full capacity. An import tax (tariff) is imposed on foreign consumer goods, and the central bank tries to maintain the interest rate.