Part 1 - Check Your Understanding - For each of the policy combinations below , identity if the aggregate demand , real output , and price level will increase , decrease , or be indeterminate Price Policy Combination Aggregate Real Demand Output Level Decrease in personal i ll income taxes and increase 1 . decrease decrease decrease in the discount rate Decrease in government spending and decrease 2 decrease decrease purchase of bonds by the central government Decrease in the reserve requirement and 3. decrease increase no change increase in taxes Central bank sells treasuries and decrease In 4 increase increase increase government spending Part 2 - Draw It - For each of the following scenarios , show the short -run effect of the policy on a correctly labeled AS/AD graph and money market graph 5. The economy is at full employment and the government cuts taxes while the central bank lowers the federal funds rate 6. The economy has a positive output gap and the government decreases spending while the central bank increases the discount rate Video Help : https ://youtu .be /bv-uNNKE391 @ Copyright Jacob Clifford 2020 . www .ACDCecon .com Annual license required . Do not use unless you have purchased a license