In addition to the use of fiscal and monetary policies to manage business cycle fluctuations, your Policy Brief team is responsible for developing policy recommendations that will expand Australia's economic productive capacity. a) Explain what factors can motivate innovation? Provide your policy recommendations on what a government can do to incentivise more innovation in the economy? (2-3 sentences) b) During the pandemic, pharmaceutical and biotech companies worked intensively to develop a vaccine for COVID-19. In the pharmaceutical and biotech industry, patents and other intellectual property are generally available to private entrepreneurs to encourage and reward this type of innovation. However your team of economists needs to also consider the potential downsides of relying on patents and intellectual property rights to encourage innovation, particularly in the context of the COVID-19 pandemic. Provide your team with an explanation of these potential downsides and risks. (2 sentences) c) Your Policy Brief team has modelled the effects of an investment in Research & Development (R&D) that leads to the invention of a new production method which makes more efficient use of renewable energy sources. This new production method can be disseminated throughout the economy, bringing down production costs for businesses, and enabling the economy to make more productive use of existing resources. This brings an expansion in the economy's productive capacity. Illustrate the predicted effects of this innovation using an AD-AS diagram. Provide bullet points to explain what is happening in your diagram. As with all of your diagrams, be sure to indicate the original and new equilibrium points, and what happens to output and price level. To conclude your explanation, explain what is the link between innovation and economic prosperity and wellbeing.Figure 1: Illustration of the economic effect of new renewable energy innovation Text box Use these bullet points to explain the impacts of this new innovation on the economy, with reference to your AD-AS diagram