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It is estimated that the recent global outbreak of Covid-19 has caused a downturn in global GDP by 2- 3%. Suppose the Canadian government wants
- It is estimated that the recent global outbreak of Covid-19 has caused a downturn in global GDP by 2- 3%.
Suppose the Canadian government wants to use Fiscal and Monetary policy to stabilize the economy during the time of this outbreak. What actions should it take in terms of Fiscal Policy? In terms of Monetary Policy? Discuss how these policies work; include diagrams in your analysis.
- Suppose a country is facing an inflationary gap, and the Central wants to use monetary policy to stabilize the economy. What kind of policy should it follow? How will it impact bond prices, interest rates, investment, the exchange rate, net exports, real GDP, and the price level. Illustrate your analysis graphically with explanations
- What are the two types of challenges faced by the government when it comes to implementing discretionary fiscal policy?
- Suppose a country is facing a recessionary gap and the government wants to use discretionary fiscal policy to stabilize the economy. What type of fiscal measures can it take? Illustrate using the AS-AD diagram the impact of the measures.
- Suppose the people of Canada has reduce their spending on goods and services from the United States.
What will be the effect on real GDP and the price level in the short run? In the long run? Explain your answer, and also show your results graphically.
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