Fiscal and Monetary Policy Analysis

Write a 3 page long, doubled spaced, 12 sized font analysis where you briefly explain the Keynesian mechanism to enact fiscal policy when a recession sets in leading the economy to high unemployment and low GDP such as the 2007-09 Financial Crisis scenario. Explain in your own words which type of policy(expansionary or contractionary) would correct this recession. SHOW via a fully-labeled graph depicting the recovery towards full employment using AD-AS as explained in chap. 21 as the government enacts an active fiscal policy. The second part of your essay should explain how the Fed, through monetary policy, would also correct this recession if it were the authority to conduct this initiative by also using a fully-labeled AD-AS graph to illustrate your reasoning.

Sample Solution