Suppose Saudi Arabia, a large oil exporter; is the home country and is initially at the full employment or potential level of output. Suddenly the world price of oil rises from $50/barrel to $100/barrel. a) Dene the terms of trade (TOT). Does Saudi Arabia's TOT increase or decrease following the rise in the world price of oil? Is this a positive or negative TOT shock for Saudi Arabia? b) Using the AADD model, illustrate the effect of the terms of trade shock on output and the exchange rate. Explain the economic intuition behind the changed in the AA-DD model. c) What government policy would you recommend to bring the economy back to its potential level of output (this could be monetary or scal policy the choice is yours)? Illustrate the impact of such a policy using the AA-DD model. d) Suppose the price of oil falls from $100/barre1 to $50/barrel. How would you answer to a], b}, and c) change? Describe briey [you can use the AADD model to answer this question, but you don't have to; feel free to describe in words]