With the onset of unprecedented pandemic, business confidence declined and investment demand fell for a given...

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With the onset of unprecedented pandemic, business confidence declined and investment demand fell for a given interest rate. a) With the help of diagrams, explain what happens to output and price level in short run and medium run. What happens to the unemployment rate in the short and medium run? [40 marks] b) Suppose the Central Bank decides to respond to the decline in business confidence in the short run. What should the Central Bank do in response? How would this action change the short run and medium run output and price level? [30 marks] c) Propose fiscal policies that can be combined with monetary policies discussed in part b) in order to mitigate risk from the economic shock. Discuss in detail with graphs the effects of such fiscal policies. [30 marks] With the onset of unprecedented pandemic, business confidence declined and investment demand fell for a given interest rate. a) With the help of diagrams, explain what happens to output and price level in short run and medium run. What happens to the unemployment rate in the short and medium run? [40 marks] b) Suppose the Central Bank decides to respond to the decline in business confidence in the short run. What should the Central Bank do in response? How would this action change the short run and medium run output and price level? [30 marks] c) Propose fiscal policies that can be combined with monetary policies discussed in part b) in order to mitigate risk from the economic shock. Discuss in detail with graphs the effects of such fiscal policies. [30 marks]

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a With the help of diagrams explain what happens to output and price level in short run and medium run What happens to the unemployment rate in the short and medium run In the short run the decrease i... View the full answer