(1) Use a diagram to illustrate and explain the negative externality in consumption of sugar (3 marks).

(2) Explain how the government has tried to resolve this externality. in question (1) Illustrate your answer with a diagram (7 marks)

(3) The U.S. has been operating above potential GDP level. Using the AD and AS model, explain why the U.S. Fed has decided to raise interest rates. (Hint: You are to include a diagram, GDP, employment level, price level and interest rates in your explanation). (7 marks)