Part A) President Biden and the Democrats are planning to increase government spending by $3.2 trillion.Using the Large Open Economy (LOE) model, illustrate and explain how the change in fiscal policy will affectS, r, CG, I, E,andNXin the U.S. in the long run.

Part B) Suppose that a wave of immigration increases the labor force.Illustrate and explain the impact on the real wage, the real rental price of capital, employment, and unemployment if:

a)The labor market is always in equilibrium.

b)The unions prevent real wages from falling.