The Central Bank of many economies have adopted unorthodox monetary policy measures (Quantitative easing (QE)) and expansionary fiscal policy (mixed policies) during the Global Financial Crisis (GFC) and the COVID19 pandemic. Cost of living pressures are rising in Australia and many countries across the globe. There is ongoing debates about the welfare implications of the recent QE and expansionary fiscal policies. Briefly discuss how unexpected monetary expansion (monetary shock) could affect welfare through the following channels. Highlight the losers and winners in your discussion. (Hint: use IS-LM models together with flexible versus sticky economic adjustment ideas)

(a) Savings-redistribution channel (b) Interest-sensitivity channel