6. Use the AD-AS model to explain how an economy will respond in the short-run to an increase

in government spending?

7. Use the AD-AS model to explain how an economy is likely to respond if the government decided to

increase income tax? Show both short-run and long-run effects?

8. Use the AD-AS model to explain each of the following questions separately-

(a) how an economy is likely to respond to a failure in paddy (crop) production in the short

run? Is it referring to stagflation?

(b) If the government intervene and increase aggregate demand to manage the situation stated

in 8 (a) in the short run, explain the possible consequence?

(c) If the government don't intervene in the market, explain the possible long-run consequence

of production failure?

10.

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