See answers below
- Expansionary fiscal policy
- Description:
- Diagram:
- Good macroeconomic effects:
- Bad macroeconomic effects:
- Evaluation points:
- Contractionary fiscal policy
- Description:
- Diagram:
- Good macroeconomic effects:
- Bad macroeconomic effects:
- Evaluation points:
- Expansionary monetary policy
- Description:
- Diagram:
- Good macroeconomic effects:
- Bad macroeconomic effects:
- Evaluation points:
- Contractionary monetary policy
- Description:
- Diagram:
- Good macroeconomic effects:
- Bad macroeconomic effects:
- Evaluation points:
- Supply side policy
- Description:
- Diagram:
- Good macroeconomic effects:
- Bad macroeconomic effects:
- Evaluation points:
Answers
- Expansionary fiscal policy
- Description: increase in government spending or decrease in taxation
- Diagram: right shift in AD
- Develop: multiplier effect, accelerator effect, supply-side effect
- Good macroeconomic effects: lower unemployment, higher economic growth
- Bad macroeconomic effects: higher inflation?
- Evaluation: budget deficit, national debt, crowding out
- Contractionary fiscal policy
- Description: decrease in government spending or increase in taxation
- Diagram: left shift in AD
- Develop:
- Good macroeconomic effects: inflation rate decreases
- Bad macroeconomic effects: economic growth decreases,unemployment increases
- Evaluation: negative multiplier, supply-side, inequality
- Expansionary monetary policy
- Description: central bank reduces interest rates
- Diagram: right shift in AD
- Good macroeconomic effects: higher inflation (towards target), higher economic growth, lower unemployment, higher exports
- Bad macroeconomic effects: higher inflation?
- Evaluation: liquidity trap, real interest rates
- Contractionary monetary policy
- Description: central bank increases interest rates
- Diagram: left shift in AD
- Good macroeconomic effects: lower inflation (towards target)
- Bad macroeconomic effects: lower economic growth, higher unemployment, lower exports
- Evaluation: net exports, real interest rates
- Supply-side policies
- Description: various policies
- Diagram: right shift in LRAS
- Good macroeconomic effects: lower inflation, higher economic growth (long-run), higher exports
- Bad macroeconomic effects: none
- Evaluation: opportunity cost, time lag