a) Explain how does monetary policy affects the equilibrium GDP.

b) Explain how can it address the problem of recession or slow growth.

c. Explain how can it address the problem of inflation (demand-pull).

a. Monetary policy has a significant impact on national income and the stability of the economy. A central bank can use open market operations or changes the interest rate to fluctuate the circulated money in the economy.

b. During a recession or slow down, people of a country make fewer economic events due to lack of money or other reasons. A central bank generally uses expansionary fiscal policy by buying government securities or reduces interest rate due to which people will have more money to spend. As a result, aggregate demand and investment increases in the economy.

c. Inflation in the situation when a firm is facing increased cost or increased demand due to which price level increases in the economy. It is the situation when people have more money to spend that result in high prices. Therefore, the central bank generally uses contractionary fiscal policy to reduce the circulated money as well as inflation.