Consider the AD-AS model discussed during the lectures. Assume that the aggregate demand curve is given by Y=8-0.5 π, th

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Consider the AD-AS model discussed during the lectures. Assume
that the aggregate demand curve is given by Y=8-0.5 π, that the
long run aggregate supply curve is given by Yp=7, that the
short run aggregate supply curve is given by π = π_expect +
0.3(Y-Yp), and that the monetary rule is given byr=1+0.3 π.
(c) Is fiscal policy more useful, less useful or equally useful
compared to monetary policy to avoid the loss of confidence
generating a recession? Discuss and compare how fiscal and monetary
policy can be separately used in response to the dynamics caused by
the loss of consumer confidence.