The increasingly tense political conflict between Australia and China has impacted the traditional trade between the two nations. These include moves by China to impose a new anti-dumping tariff on barley, suspensions of certain beef imports and investigations into cheap Australian wine imports amid a coronavirus-led economic slowdown (South China Morning Post, 29/09/2020).

Assume that Australia is already experiencing recession due to the COVID-19 pandemic, bushfires, and drought. GDP has been dragged down particularly due to weak spending by households (a reduction in consumer confidence) and a significant reduction in investment (a reduction in business confidence).

1) Use the IS-LM and the AS-AD diagrams to illustrate the impact on Australia's output, the unemployment rate, the price level and the interest rate in both the short-run and the medium-run from a reduction in net exports due to the trade conflict between Australia and China. Explain your answers. (Note, Australia has a price target.)