Q1 - Modules L3 and L4.Aggregate Demand and Fiscal Policy in Recessionary Times

Australia has been in recession during the first half of 2020 as the pandemic led to a substantial reduction in production and household spending, according to this article:https://www.theguardian.com/business/grogonomics/2020/sep/02/australians-needs-government-support-to-get-out-of-this-recession-winding-it-back-is-not-an-option

In response, fiscal policy in Australia has played an important counter-cyclical role, as pointed out in these articles:

https://www.theguardian.com/australia-news/2020/jul/21/jobseeker-payment-economists-on-why-its-dangerous-to-cut-covid-19-welfare-subsidy

https://www.abc.net.au/news/2020-10-06/why-people-spend-save-stimulus-tax-cut-coronavirus-budget/12698520

A.Use the multiplier model to illustrate and explain in some detail how the aggregate demand function will shift due to the pandemic-led "household recession".

B.On the same diagram in Part A, illustrate and explain how fiscal stimulus measures are helping to mitigate the macroeconomic shock from the coronavirus.

C.Elaborate on the different ways in which Australian households (more vs. less credit-constrained) have responded to the government stabilisation policies.