Grade 12 Economics

Real GDP Output THE BUSINESS CYCLE FISCAL AND MONETARY POLICY INFLATION / Recovery I \\ / Expansion \\ I! \\ \\ / Contraction Recession RECESSION RECESSION Tlrne 1. Fully explain how fiscal policy and monetary policy can be used to balance out the swings in the business cycle. Divide your answer into 2 parts: m When AD is above full employment, what can the Minister Finance do under scal policy, and what can the Bank of Canada do under monetary policy to help slow down inationary times? Part 2: When AD is below full employment, what can the Minister Finance do under scal policy, and what can the Bank of Canada do under monetary policy to help get the economy out of recessionary times? 2. Describe how a cyclically balanced budget approach is benecial to managing swings in the business cycle