1. Use of discretionary policy to stabilize the economyShould policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of howmonetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen economic fluctuations.The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve(LRAS) for the economy in April 2023. According to the graph, this economy is inTo bring the economy back to the natural levelof output, the government could usemonetary or fiscal policy such as Shift the appropriate curve on the following graph to illustrate the effects of the policy you chose.(?150LRASASAD130110AS90AD7050202224262830OUTPUT (Trillions of dollars)Suppose that in April 2023, policymakers undertake the type of policy that is necessary to bring the economy back to the natural level of output, giventhe scenario just described. In June 2023, imports decrease, because the United States has implemented trade restrictions on French goods. Becauseof theassociated with implementing monetary and fiscal policy, the impact of the policymakers' stabilization policy will likelyonce the effects of the policy are fully realized.PRICE LEVEL

In first Paragraph 1.) Recession is coming when two consecutive quarters of decline in GDP.…

Suppose that in April 2023, policymakers undertake the type of policy that is necessary to bring the economy back to the natural level of output, given the scenario just described. In June 2023, imports decrease, because the United States has implemented trade restrictions on French goods. Because of the associated with implementing monetary and fiscal policy, the impact of the policymakers' stabilization policy will likely once the effects of the policy are fully realized.