Question: a. Identify one fiscal policy tool that will solve the problem. b. Using a correctly drawn and labeled AD/AS graph and loanable funds graph, show

a. Identify one fiscal policy tool that will solve the problem.

b. Using a correctly drawn and labeled AD/AS graph and loanable funds graph, show and explain how the policy you identified in (a) will affect each of the following in the short-run:

  • output and employment
  • price level
  • interest rates

c. Explain how the policy you identified in (a) will affect each of the following:

  • International value of the dollar
  • American exports (based on the changing value of the dollar)

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