Problem
(Problems with Active Policy) Use an AD-AS diagram to illustrate and explain the short-run and long-run effects on the economy of the following situation: Both the natural rate of unemployment and the actual rate of unemployment are 5 percent. However, the government believes that the natural rate of unemployment is 6 percent and that the economy is overheating. Therefore, it introduces a policy to reduce aggregate demand.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.