Answer to Question #201664 in Macroeconomics for Akhona Klanisi

Question

Assume the economy is in a recession. Explain how each of the following policies would affect consumption, investment and national income (GDP). In each case, indicate any direct effects, any effects resulting from changes in the macroeconomic variables and the overall effect in the economy. If there are conflicting effects making the answer ambiguous, say so.

a)    How fiscal policy influences aggregate demand and how these can be used to expand the economy?

b)    How monetary policy influences aggregate demand and how these can be used to expand the economy?

Answer 1

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