1. Assume the United States is operating above full employment.

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)