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please answer the question below 10. During an interview back in 2008 when the world faced The Great Recession, the German Finance Minister said, We

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please answer the question below

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10. During an interview back in 2008 when the world faced The Great Recession, the German Finance Minister said, "We have to watch out that in Europe and beyond, nothing like a combination of downward economic (growth) and high inflation emerges - something that experts call "stagflation." Such a situation can be depicted by the movement of the short-run aggregate supply curve from its original position SRAS, to its new position SRAS2, with the new equilibrium point 12 in the accompanying figure. In this question we try to understand why stagflation is particularly hard to fix using fiscal policy. Aggregate price LRAS level SRASZ SRAS, . Real GDP Recessionary gap What would be the appropriate fiscal policy response (expansionary or contractionary) to this situation if the primary concern of the government was to maintain economic growth? Illustrate the effect of the policy on what happens to the equilibrium point (call it Ey and the aggregate price level using the diagram above. Show what happens to the AD curve and to P and Y. Also write out below the direction of the fiscal policy response (does G, T or TR go up or down?)

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