The United States is suffering from a high rate of unemployment.

a. Identify two fiscal policy actions that Congress might initiate to solve the problem.

b. Using a correctly labeled AD/AS graph, show and explain how the policies you identified in (a) will affect each of the following in the short-run.

b (i). aggregate demand

b (ii). output and employment

b (iii). price level

c. Explain how the policies you identified in part (a) will impact real interest rates in the short-run.

d. If the interest rate effect you identified in part (b) continues in the long run, explain how economic growth will be impacted.