Draw a diagram of the chinese macroeconomy

Reference no: EM133486509

Question:??The term "fiscal policy" is used to describe the government's management of the economy through taxation, public expenditure, and loans. The Chinese government could use expansionary fiscal policies to help the economy rebound from the effects of the zero COVID-19 policy. There are a variety of fiscal policies that might be implemented, such as increased expenditure, reduced taxation, government credits, and increased investment in strategic sectors.

1. Before the fiscal policy implementation:

- The AD curve would shift leftward due to reduced consumer spending, business investment, and net exports caused by the zero COVID-19 policy.

- The AS curve might also shift leftward due to disruptions in production, supply chain issues, and reduced productivity.

- The equilibrium point (E1) would move to a lower level of real GDP and a higher price level.

2. After the fiscal policy implementation:

- Expansionary fiscal measures would shift the AD curve to the right, reflecting increased government spending, tax cuts, and industry support.

- The AS curve might shift rightward as increased economic activity and investment lead to improved productivity and production capacity.

- The new equilibrium point (E2) would be at a higher level of real GDP, potentially approaching or even surpassing the pre-zero COVID-19 policy level, while the price level may experience some upward pressure.

Draw a diagram of the Chinese macroeconomy using the aggregate demand and aggregate supply (AD/AS) model showing the effect(s) of the zero covid policy, and then after the (successful) implementation of your fiscal policy program. Clearly show on your diagram(s) the before and after cases.

Reference no: EM133486509

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