Suppose the economy begins at full employment. Label this st…

Suppose the economy begins at full employment. Label this starting point as point “1.” Then, suppose that, due to increased instability in the financial markets, a decrease in investor and consumer confidence occurs. Show the effects on your graph and label the new equilibrium point “2.” Based on the above, the price level will [answer1] and the level of production will [answer2]. Lastly, suppose the Federal Reserve wants the economy to return to full-employment as quickly as possible. Should the Fed intervene? If so, show the impact of successful monetary policy on your graph. Label this new equilibrium point “3.” You will upload your graph at the end of the exam.