1. Assume that over the past year the unemployment rate has decreased from 9% to 7%, the GDP growth rate has increased from 2% to 4%, and the inflation rate has increased from 2% to 5%. As an economist for the government, what advice would you give to the Minister of Finance, who is trying to lead the economy with only fiscal policies at his/her disposal? In your answer you should refer to aggregate supply and demand, the GDP equation, the multiplier, and discretionary fiscal policies. (5 marks) 2. One of the dangers of using expansionary fiscal policy is that it can cause inflation. Referring to government spending and taxation decisions, aggregate supply and demand curves, and the GDP equation, explain the circumstances under which expansionary fiscal policy is likely to cause significant inflation. (5 marks) 9 tv N MacBook Air 888 $ 3 4 5 6 7 8 9 E R T Y U O