. Fiscal and monetary policies are intended to solve problems of unemployment and inflation that arise due to economic instability. (a) What fiscal policy options must the government implement in order to solve demand-pull inflation in the economy? (b) Assume that Malawi's economy whose households save 16% of the annual income experiences recession, which leaves a GDP gap of K22.5 billion. (i) Determine why a combination of $1.5 billion government spending with a $2.5 billion change in taxes would eliminate the K22.5 billion GDP gap. [4 (ii) If the government expenditures decides to solve the problem alone, by how much must its change? [2 (c) With the aid of a graphical illustration explain supply-side effects of an appropriate fiscal policy on inflation and unemployment in a recessionary [4 marks] economy. (d) Mention any two factors that guarantee the value of money as a medium of exchange in the economy. [2 (e) Suppose nominal GDP increases from $360 billion to $490 billion and the money velocity is 3. What would be the amount of transactions demand for money? [2 marks] (f) What are the two most effective tools of monetary policy? (g) Identify any two key weaknesses of monetary policy.