Q1 International finance

Imagine the economy is at a point on the AA-DD diagram which is above both the DD schedule and the AA schedule with output below equilibrium output. Describe the conditions in the economy at that point and explain what will happen to achieve equilibrium in the economy. (Fully explain the mechanism and channels by which equilibrium will be achieved and show the movements on the AA-DD graph) (hint: This has nothing to do with fiscal or monetary policy). (6)