Q1. a) Consider an economy facing demand pull inflation, explain the determination of

equilibrium output and prices under i) Keynesian regime, ii) Classical regime, and iii)

Intermediate regime (10)

b) Consider an initial scenario of recession in the economy. The following information is

provided:

Recessionary gap = - $20million Marginal propensity to save = 0.25

How much should be the enhancement in government spending to move the economy back to

potential output level? (3)

c) What is the role of built-in-stabilizers in moderating business cycles? Explain it through

diagram. (4)

d) List down factors that give rise to economic growth.