Question

Fiscal Policy Sheltered Canada's Economy from the Worst Effects of the Global Recession

The Conference Board of Canada says that Canada weathered the global financial crisis and recession better than many other countries because of better policies already in place. Canada was in a much stronger position going into the recession thanks to its low and declining government debt and budget surpluses. The design of government policy and the speed of the policy response can make a huge difference in preventing or mitigating the worst of a recession.

Source: Conference Board of Canada

8. a.Explain the potential demand-side effects of "low and declining government debt and budget surpluses."

b. Explain the potential supply-side effects of "low and declining government debt and budget surpluses."

c.Draw a graph to illustrate the combined demand-side and supply-side effects of "low and declining government debt and budget surpluses."