You must answer this question by using the Aggregate Demand (AD) and Aggregate Supply (AS) model and use the Dutch economy as the starting point for your analysis.

3a) Use the AD/AS model to explain how recentfiscalpolicy changes intend to stabilize theDutch economy and compare this with a 'do-nothing' approach.

3b) Use the AD/AS model to explain how recent changes inmonetarypolicy intend to stabilize the Dutch economy and compare this with a'do-nothing' approach.

3a, you must use the AD/AS model to explain how the expansionary fiscal policyof the Dutch government aims to stabilize the economy and compare this with a 'do-nothing' scenario.

First, start by graphing the macro-economic situation in the Netherlands just before the Dutch government announced its economic measures in March 2020. Use the AD/AS model as the basis for your graph. Make sure you include the AD curve, the SAS curve and the LAS curve in your graph. Clearly label the curves and the axis. You do not have to use real data.

Now form a view on how thisfiscalpolicy aims to stabilize the Dutch economy. Consider aggregate demand first. If you conclude the policy does not influence aggregate demand, argue why not. If you conclude the policy does influence aggregate demand, explain which components of aggregate demand are affected and how you expect them to influence aggregate demand. Make sure you describe the intended impact on output/real GDP and the price level and compare this with a situation where the government would not intervene. Show the effects of the policy in your graph by clearly showing how the AD curve might shift, if at all.

Now consider how the policy influences aggregate supply. Clearly argue why it does, or why not. If you believe the policy affects aggregate supply, make sure you describe the intended impact on output/real GDP and compare this with a situation where there is no intervention. Illustrate your answer by showing how the AS curve might possibly change in your graph.

Do the same for long-run aggregate supply.

In question 3b, follow the same steps as under step 3a but now focus on using the AD/AS model to explain how recentmonetarypolicy changes aim to stabilize the economy.