Suppose Country A is experiencing a recession and a higher than normal

unemployment rate. The government in country A is in charge of undertaking

different policies to overcome the recession and reduce the unemployment rate.

(a) Suppose the government offers a stimulus package to overcome the recession.

Describe how this stimulus package could prevent the recession and would it

necessarily work well?

(b) Now suppose there is a Country B that trades with Country A. In particular,

Country A imports some products from Country B. What would be the effects on

trade between the two countries because of the policy in part (a)?

(c) Suppose the stimulus package is via an increase in the government expenditure.

How should the government decide about the exact amount of expenditure to obtain

full employment?