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Question: assess the impact on the economy of the following assume...

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Assess the impact on the economy of the following: Assume the economy is initially at the full employment output level i.e. where actual and potential output are equal.

a       A downturn in world economic activity.

b      A deterioration in consumer confidence

c.     An improvement in the confidence of the private sector.

What should be the monetary and fiscal policy response of the government in each case?

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