In Macroland public or government spending (G) is relatively unproductive, when compared to private real investment (I). Policymakers want to stimulate private investment, but politically they cannot accept inflation arising as a result of this policy. Therefore, they want to keep AD stable while still stimulating real investment. One of the members of the Council of Economic Advisors says there’s nothing they can do then.

a) Do you think he is right? Yes / No

b) If he is wrong, what is the best fiscal policy for the government and monetary authorities facing this situation?