Aggregate Demand and Supply

Please answer the questions below in no more than 500 words based on the following posed trade policy scenario: The US increases trade restrictions with China.

1. How does this affect Aggregate Demand and Supply?
2. What are the corresponding effects on Unemployment and Inflation as a result?
3. What fiscal and or monetary policies would you recommend to bring the economy back to Long Run Equilibrium?
4. Why would or why wouldn’t you support this trade policy?

In answering these questions, the student should be able to:

• Correctly interpret the impact of the discussed trade policy scenario on aggregate supply & demand.
• Use appropriate economic reasoning in the critique of trade policy scenario.
• Correctly identify the given trade policy scenario’s impact on unemployment and inflation.
• Recommend the appropriate fiscal and or monetary policies, given the trade policy scenario examined.