Assume the United States is operating below full employment.

1. Identify one monetary policy tool that will solve the problem.

2. Using a correctly drawn and labeled AD/AS graph and money market graph, show and explain how the policy you identified in (a) will affect each of the following in the short-run:

i. output and employment

ii. price level

iii. interest rates

3. Explain how the policy you identified in (a) will affect each of the following:

i International value of the dollar

ii. American exports (based on the changing value of the dollar)