1. Draw an aggregate model for Dasland operating below full employment, labeling current output and price level as PL1 and Y1.

2. Dasland begins recovering and is now buying more products from Ireland.

(a) What happens to Ireland's Aggregate Demand? Explain.

(b) What happens to income in Ireland? Explain.

3. Draw a correctly-labeled Money Market for Ireland.Based on your answer to Part 2 (a), show the effect on Ireland's Money Market.

4. Quite suddenly, price levels increase in Ireland. Combining this information what you saw happen to Ireland's nominal interest rate in Part 3, what will happen to Ireland's real interest rate? Explain.

5. Arjunaland has a population of 200,000, a labor force of 100,000 in addition fo 20,000 working part-time and 70,000 people working full time. Calculate Arjunaland's unemployment rate.

6. Arjunalands CPI is 130 in 2020 and CPI is 120 in 2019. Calculate the inflation rate in Arjunaland. You can round to the nearest whole number if you wish.

7. Using the data from questions 1 and 2, plot out a Phillips Curve model for Arjunland. Be sure to include a Long-run Phillips curve and be sure to label your model correctly.

8. What economic condition is Arjunaland facing? (2 pts) How fiscal policy can remedy this condition?

9. Using the fiscal policy remedy from Q5, show the effect of this policy change on the Phillips Curve model.

10. Now assume that Arjunaland has inflation with a $500 million gap. Label this inflation as point 'V' on the Phillips Curve model.

11. The MPC is 0.8 and Arjunaland decreases Consumption spending by $75 million.On you Phillips Curve model, label where Arjunaland will now be due to this decreased spending as point 'Z'.

B1. What is happens to the value of Arjunaland's currency based on the action in question 11?

B2. What is the change to GDP if Arjunaland chooses to increase taxes instead of decrease spending?

B3. What happens to real wages in Arjunaland as a result of your answer to question 11?