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Question 4. (25 marks) In the recent policy debate on getting both Japan and the Eurozone out of the Covid-19 crisis, the use of helicopter

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Question 4. (25 marks) In the recent policy debate on getting both Japan and the Eurozone out of the Covid-19 crisis, the use of helicopter money has been proposed. a) Provide a detailed explanation of how this policy works. Use the AD-AS schedule to show how it would work, assuming that the economy is below its long-term capacity constraint (i.e., below the long-term aggregate supply curve). (15 marks) b) Explain the difference between helicopter money and the government paying every household in the country a fixed amount of money (i.e., using fiscal policy). (10 marks)

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