3) Discuss the two possible fiscal policies that the Greek government can undertake to fix its debt issue.

a) In particular, what would be the effect on aggregate demand if the government cut public spending by 10%? Using our IS-LM model, show what the impact on the economy of this policy would be.

b) What is the other fiscal policy that the Greek government could implement to fix its debt issue? Using our IS-LM model, show what the impact on the economy of this policy would be.

c) Which policy is better (if any), and why? Is the better policy at odds with what the

"people" might want? Explain.