Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 25

Assuming that unemployment is high and spending is low, answer the following questions.
a. Should the government pursue expansionary or contractionary fiscal policy?
b. What will the appropriate policy do to the aggregate demand curve? Will the curve shift to the right or to the left?
c. Through which component(s) of aggregate demand (C, I, G, or NX, or some combination of the preceding) will the change occur?