Demand management can be used by both fiscal and monetary policy. Suppose that fiscal policy makers decide to employ an expansionary policy in the aim to stimulate a weak economy.

6.1 Explain how fiscal policy can use both policy instruments at their disposal to stimulate an economy. (2)

6.2 Based on your answer (6.1), illustrate, and explain by aid of the AD-AS model what the identified policy employment by Fiscal Authorities will have on the general price level and the level of real production and income in the economy. (6)

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