If you were a policy maker and were faced with the issues below, determine whether AD or AS should be increased, decreased, or left alone to correct the economy, and identify what you would recommend be done (increase/decrease; buy/sell) using each tool for thescenario (answer on each line) to accomplish this.Suppose that the natural rate of unemployment is 4%.

#1 Unemployment = 10%; Inflation = 1%

Action -- Increase/Decrease AD/AS?? ____________________

Fiscal Policy -- BusinessTaxation _______________________________

Household Taxation ______________________________

Government Expenditures _________________________

Monetary Policy -- OMO _________________________________________

Discount Rate __________________________________

Reserve Ratio __________________________________

Explain logic ___________________________________________________

#2Unemployment = 1%; Inflation = 10%

Action -- Increase/Decrease AD/AS?? ____________________

Fiscal Policy -- BusinessTaxation _______________________________

Household Taxation ______________________________

Government Expenditures _________________________

Monetary Policy -- OMO _________________________________________

Discount Rate __________________________________

Reserve Ratio __________________________________

Explain logic ___________________________________________________

#3Unemployment = 10%; Inflation = 10%

Action -- Increase/Decrease AD/AS?? ____________________

Fiscal Policy -- BusinessTaxation _______________________________

Household Taxation ______________________________

Government Expenditures _________________________

Monetary Policy -- OMO _________________________________________

Discount Rate __________________________________

Reserve Ratio __________________________________

Explain logic ___________________________________________________

#4 Unemployment = 4%; Inflation = 1%

Action -- Increase/Decrease AD/AS?? ____________________

Fiscal Policy -- BusinessTaxation _______________________________

Household Taxation ______________________________

Government Expenditures _________________________

Monetary Policy -- OMO _________________________________________

Discount Rate __________________________________

Reserve Ratio __________________________________

Explain logic ___________________________________________________