Read the following paragraphs from an article published in 'Business World' and answer the questions that follow:

In the time of high pandemic transmission, consumption and investment are down because people are restricted or discouraged from engaging in normal activities. They fear the virus. The push of economic managers to reopen the economy in a situation of high COVID-19 transmission will not be enough for people to conquer their fear.

Depressed consumption and investment result in an output gap. The output gap means potential output or full employment has not been met. But because neither private consumption nor private investment can close the gap, government spending has to do the heavy lifting.

But government spending not only covers the huge output gap (as evidenced by the deep recession) but also the big expenditures to flatten the pandemic curve. Government must spend not only to protect the unemployed but also to save the sick, the dying, and the hungry.

Bold government spending is absolutely necessary, even if this would mean violating the conventional debt and deficit indicators. Since we are dealing with an extraordinary pandemic and economic crisis, the worry of the economic managers regarding higher debt and deficit is misplaced.

Source: Business World (2021)

1. Summarise the key arguments outlined in the above paragraphs. (6 marks)
2. Use the IS-LM model to analyse the effect of an increase in government spending on the interest rate and output in the economy. Do you agree with the policy recommendation of raising government spending? Explain. (14 marks)