1. The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now stock market prices begin significant increases, causing peoples' investments, such as their retirement accounts and other investments, to increase in value. People feel very good about the future and use their new-found wealth to buy things that they had been hesitant to purchase in the past.

e. How would the use of these fiscal policy tools stabilize the economy?

2. The economy of a hypothetical country has been stable for two or three years with very low unemployment. Wages have been gradually increasing during this time. Now an aggressive policy of increasing tariffs on foreign goods imported into the country results in retaliatory actions from the other countries against the hypothetical country's products and services. This causes great loss of business in the hypothetical country, and results in significant unemployment.

e. How would the use of these fiscal policy tools stabilize the economy?