Using either the Keynesian cross model or the market for real money balances (whichever one is appropriate), please illustrate what happens under the following circumstances. Then illustrate this using the IS-LM model. Finally, comment on what happens to income/output and the interest rate? a. The Fed buys bonds using open market operations.
b. According to the American Society of Civil Engineers (ASCE), America’s infrastructure gets a grade of D+. Feeling very ashamed, Congress decides to take action and allocates $3.5 trillion for construction projects.
c. The government raises income taxes.

answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.