Task 3 - 25 Marks Aggregate demand in Country C is given by C + 1 + G + (X -Z), where C = consumption expenditure I = investment expenditure G = government expenditure X = exports Z = imports a) Assume that Country C is in recession, with a level of income of Y* that is significantly less than the full employment level of income, as demonstrated in the diagram below: Aggregate 45 degrees demand C+I+G+(X-Z) Income Yf The government of Country C decides to use fiscal policy, in the form of changes in government expenditure or taxation, in order to shift the economy from Y* to Yf. Identify what the monetary implications of this change in fiscal policy will be and discuss how those implications may limit the effectiveness of the fiscal policy. (10 marks) b) Assess the THREE (3) major constraints that apply when governments use fiscal policy in an attempt to stabilise the level of income in an economy. (15 marks)