An article in the Wall Street Journal noted that real GDP in Greece declined during 2016. The article stated that economists “attributed it to a 2.1% decline in [government spending] and weaker net...

An article in the Wall Street Journal noted that real GDP

in Greece declined during 2016. The article stated that

economists “attributed it to a 2.1% decline in [government

spending] and weaker net exports”

a. Use a basic aggregate demand and aggregate supply

graph (with LRAS constant) to illustrate what happened in Greece in 2016.

b. On your graph, show the adjustment back to long-run

equilibrium.

Source: Nektaria Stamouli, “Greek Economy Contracts at Faster Pace

than Estimated Adding Hurdle to Bailout Talks,” Wall Street Journal,

March 6, 2017.