Explain the fiscal and monetary policy used in the attached document using IS model and the AD model 05:18 Tue 7 Deca 33%88 0India unveils 'underwhelming' $10bn stimulus for pandemic hit economy(Amy Kazmin, 12 October 2020)India has unveiled plans to inject at least $10bn into its economy, amid warnings fromeconomists that New Delhi has done too little to revive growth after the shock of its coronaviruslockdown.Nirmala Sitharaman, finance minister, said the stimulus scheme would increase capitalexpenditure, help cash-strapped states and encourage consumer spending with measures thatincluded giving central government employees advance wages ahead of the upcoming festivalseason.Monday's announcement comes days after the Reserve Bank of India said gross domesticproduct would contract by 9.6 per cent during the current April to March financial year – the firstofficial acknowledgement of the magnitude of India's economic crisis.However, economists reacted coolly to the new measures, concluding they would have only amarginal impact on an economy that contracted by 24 per cent year on year in the April to Junequarter.As Ms Sitharaman announced the economic plan, the Bombay Stock Exchange slipped intonegative territory, recovering later to close marginally up."It's pretty underwhelming", said Shilan Shah, India economist at Capital Economics, whichexpects India's economy to contract by 12 per cent this year. "It appears more symbolic ratherthan anything particularly meaningful."The new measures are expected to provide a direct demand boost of less than 0.4 per cent ofGDP, which Mr Shah called "very, very small."The Indian government resisted economists' calls to turn on the financial tap to supportcollapsing growth, fearing such a move would blow out its public finances and encourageinternational rating agencies to downgrade its debt.Ms Sitharaman again emphasised New Delhi's commitment to fiscal prudence on Monday,though India's combined fiscal deficit is already expected to soar as high as 13 per cent this yearas revenues collapse.New Delhi plans to boost its capital expenditure budget for the year by 6 per cent, with theadditional $3.4bn devoted to spending on roads, water supply, urban development and defenceinfrastructure.New Delhi will also give a total of $1.6bn in 50-year, interest-free loans to cash-strapped states touse for capital expenditure by March 31, or to pay outstanding bills for already completed work.New Delhi has also devised a complex scheme to permit central government employees, publicsector bank staff, and staff of state-owned enterprises to use money allocated for home leaveand other holiday travel to instead purchase consumer goods.All central govermment employees will also receive a Rs10,000 ($136) interest-free advance forthe upcoming festival season. The funds – which will be given through a pre-paid card – must bespent by March 31, and will be repaid in 10 equal instalments.Radhika Rao, and economist from DBS Research Group, said New Delhi's latest initiatives weredesigned to spur consumption "while also spending-lite so as not to put an additional burden onthe exchequer in the midst of a notable shortfall of tax and disinvestment revenues".

Policy: It refers to the policies that is used by the government for the economic stabilization. The…

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Explain the fiscal and monetary policy used in the attached document using IS model and the AD model

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 25RQ: Briefly explain the reason for the near-vertical shape of the SRAS curve on its far right.

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