Question
SCENARIO: During the COVID-19 pandemic, Country X put in place fiscal support to cushion its citizens from adverse economic impacts arising from government-imposed restrictions and
SCENARIO: During the COVID-19 pandemic, Country X put in place fiscal support to cushion its citizens from adverse economic impacts arising from government-imposed restrictions and voluntary personal decisions. Research has found out that the fiscal stimulus boosted the consumption of goods with little impact on production.
Country X is also facing the economic impacts of both Ukraine-Russia conflict and high oil prices for its oil imports (a major input in production). Use the relevant economic theories and concepts in ECON 248 to answer the questions below.
What monetary policy would you prescribe to help mitigate the impact of fiscal stimulus on price level? Use the AD-AS diagram to show how your policy recommendation could be expected to affect the equilibrium price level and income.
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