Create a graph with an aggregate demand curve and an aggregate supply curve in the short-run. Use the variable ‘Price Level’ for the vertical axis and ‘Real GDP’ for the horizontal axis. Indicate the equilibrium level of output and the price level. Then describe a fiscal policy scenario that could result in a reduction of unemployment. Show the new equilibrium level of output and price level as a result of this policy in your graph. Explain how the implementation of this policy is related to the simple spending multiplier. Explain how the fiscal policy could solve the problem of unemployment. Use your graph to illustrate your explanation.

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