Chapter 30, Problem 53P

Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer:

1. A recession.
2. A stock market collapse that hurts consumer and business confidence.
3. Extremely rapid growth of exports.
4. Rising inflation.
5. A rise in the natural rate of unemployment.
6. A rise in oil prices.