Assume that the economy is initially in short-run equilibrium at a level of output above the natural rate. Use the IS-LM model to illustrate graphically how the levels of income and interest rates change as the economy returns to the natural rate of output in the long run. 
Definitions:
Price Level
The comprehensive mean price across all goods and services in the current economy.
Classical Dichotomy
A concept in economics that separates real variables, which are quantities or measures not adjusted for inflation, from nominal variables, which are adjusted for inflation.
Real GDP
A measure of the value of all goods and services produced within a country over a specific time period, adjusted for inflation.
Nominal Wage
The wage paid to employees in current dollars, without adjustment for inflation, reflecting the actual amount of money received.
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