Assume an economy is currently operating at point A and answer the following questions.

c) What key policy recommendations would you make for an economy like this one that is currently operating at point A? Justify why you believe this is appropriate policy.

d) Illustrate using the IS-LM model how the policy recommendations you provide in c) will impact the economy. On your diagram indicate the new point that the policy takes the economy to and label this as point B.

key points for c : Policy recommendations provided with rationale, clearly show benefits of the policy

key points for d: diagram shown including the impact of policy recommendations given in c) being shown and new point B correctly identified

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