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)