Compare the use of fiscal and monetary policy to stabilise the economy.

Introductory Macroeconomics Individual Assignment Guidance

Total Word count for both questions is 1,500 words (+/-10%).

You can draw figures by hand and include as an image.

You always need to explain in words what is happening in your diagrams.

Label all axes, points on the diagram and lines.Assessment 2 Coursework Brief and Guidance:

In this assignment you will use the materials from Unit 14 and Unit 15 regarding Fiscal and Monetary Policy to answers these questions:

1.Compare the use of fiscal and monetary policy to stabilise the economy.This question is asking you to think about the positives and negatives of fiscal and monetary policy tostabilise aggregate demand. Look at relevant sections in Unit 14 in particular at the discussion aboutgovernment finances in Unit 14. In Unit 15 relevant sections about monetary policy in particularabout zero lower bound.

2.Illustrate using the Aggregate Demand Model (45° line diagram) the effects of

(a) the lockdown and

(b) the fiscal and monetary policy measures adopted by the government and Bank of England so far during the pandemic.Aggregate demand shock, show what happens AD curve? Which components of the AD are affected and how? Show graphically and explain how the aggregate demand function may shift with these fiscal policies.

Include an explanation of how the multiplier process will affect the results of the fiscal stimulus. Include a list of examples of fiscal stimulus and how they affect the aggregate demand function. Now look at the monetary policy, provide examples and use the aggregate demand model to show graphically quantitative easing would shift the aggregate demand function.

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