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9. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy'.J The following questions address the issue of how monetary and fiscal policies affect the economy, and the pros and cons of using these tools to combat economicfluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in May 2023. Suppose the government decides to intervene to bring the economy back to the natural level of output by using 7 policy. Depending on which curve is affected by the government poiicy, shift either the AS curve or the AD curve to reect the change that wouid successfutty restore the nature! tevet of output. (is) 150 0 A5 130 AD Cl 4 no - A5 LLI ; LLI J LLI D E W ' AD 70 LRAS 50 ' I . 20 22 24 2:1 25 30 OUTPUT [Trions oi dolars} Suppose that in May the government undertakes the type of policy that is necessary to bring the economy back to the natural level of output in the preceding scenario. In September 2023, U.S. exports increase because China eliminates all trade restrictions on U.S. goods. Because of the 7 associated with implementing monetary and fiscal policy, the impact of the government's new policy will likely 7 once the effects of the policy are fully realized