6.1 Governments play an important role in maintaining policies that support businesses. Entering into trade agreements with other governments, negotiating better terms of trade, framing favourable trade policies etc can all come under what economists call Supply side fiscal policy.

Use the AD-AS model below to explain how successful government policies such as the above-mentioned affect Australian businesses and the country's GDP/economy.

Your answer should consider the following

- Comment on the influence this may have on the direction that AD and/or AS curves will shiftand why.

- Indicate what the new GDP, CPI may be, based on data in the given model.

- Contrast the effect on inflation compared to Demand-side fiscal policy.