Consider AD, SRAS and LRAS for the economy of countryXantron.
1.1 Suppose Xantron is having real GDP lower than $1 million in ashort-run situation, compared to Xantron's potential GDP. Give anexample what might have caused this kind of situation in Xantronthat could be mitigated by Monetary Policy. What kind of monetarypolicy could be useful for the economy of Xantron to restorepotential GDP? Explain short-run and long-run dynamics (changes/shifts/movements relating to AD, SRAS, LRAS, changes inprice level, output level etc. associated with this particularMonetary policy)
1.2 Suppose in a short-run situation Xantron has realGDP exceeding potential GDP by $1 million. Give an example whatmight have caused this kind of situation in Xantron that could bemitigated by Monetary policy. What kind of Monetary policy could beuseful for the economy of Xantron to restore potential GDP? Explainshort-run and long-run dynamics (changes/shifts/movements relatingto AD, SRAS, LRAS, changes in price level, output levels etc.associated with this particular Monetary policy)
