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The United States is suffering from a high rate of unemployment.
a. Identify two fiscal policy actions that Congress might initiate to solve the problem.
b. Using a correctly labeled AD/AS graph, show and explain how the policies you identified in (a) will affect each of the following in the short-run.
b (i). aggregate demand
b (ii). output and employment
b (iii). price level
c. Explain how the policies you identified in part (a) will impact real interest rates in the short-run.
d. If the interest rate effect you identified in part (b) continues in the long run, explain how economic growth will be impacted.
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