Asume an economy with lump-sum taxes is hit by a large negative demand shock (e.g. financial crisis). In response, the government introduces a large fiscal stimulus package to try and boost economic activity and help to stabilize the economy. Assess whether the policy will be successful in each of the following cases:

(a) In the 3-equation model, when stimulus is financed through borrowing.

(b) In the 3 -equation model, when the stimulus is financed by raising taxes (i.e. a balanced budget expansion).

(c) In the RE - PIH model, when the stimulus is financed through borrowing.

In which case will output expand the most? Justify your answer.