Illustrate how the action affects the ad-as model

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Reference no: EM132198755

Question: Assume the government undertakes expansionary fiscal policy.

(a) Illustrate (draw) how this action affects:

1. the AD-AS model;

2. the Phillips curve model;

3. the IS-LM model.

(b) As a result of the change in (a) above, what is the impact on:

1. economic activity

2. the price level

3. the inflation rate

4. interest rates

5. the unemployment rate

(c) Consider why a government would undertake expansionary fiscal policy. Explain the condition that may be taking place in the economy that would require expansionary fiscal policy. What are the costs/problems of undertaking expansionary fiscal policy? Under what circumstance would fiscal policy be more appropriate/effective rather than using monetary policy? (word limit:150-200 words)

Reference no: EM132198755

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