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A major component of the recovery plan is the use of fiscal policy and monetary policy to help stabilize the economy. With the use of

A major component of the recovery plan is the use of fiscal policy and monetary policy to help stabilize the economy. With the use of appropriate IS-LM diagrams, illustrate:

a. The economic impact of expansionary fiscal policy if the central bank seeks to maintain the interest rate

b. . Given your response in 'a' above, use the Phillips curve to illustrate on separate diagrams:

i. The impact of the monetary policy in the short run; and

ii. The impact of the monetary policy if the authorities announced its intent in advance.

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