Scenario:

Assume, corona virus pandemic has caused major disruption in global supply chain affecting the supply of critical inputs to production. This has affected the supply side of Singaporean economy on the large scale. When the central bank is concerned about falling output and rising unemployment, it adopts a more expansionary monetary policy. As the economy's money supply grows, so does people's real purchasing power. As a result, demand for product increases, shifting the AD curve to the right. In the IS-LM model, as the supply of money grows, equilibrium manufacturing expands and the interest rate and in demand side equilibrium decrease. As a result, the AD curve shifts to the right, and equilibrium output increases before returning to its original state. At the new equilibrium, inflation is worse than before.

Question:

Explain policy action and associated trade-offs in each of the above scenarios.