You are a member of the president's Council of Economic Advisers for the country of Manulo. Currently the
economy of Manulo is feeling the impacts of the crisis in the nation of Zedland, a major trade partner.
Manulo's GDP is currently at $300b and is estimates show that Manulo's economy has the capacity to
produce $360b. As a nation Manulo has a Marginal Propensity to Save of 10%, has zero national debt, and
its most recent government budget was balanced. Prepare a brief report that answers the following
questions:
1. Based on what you explained previously (scenario 4) about short run vs long equilibrium, the president
favors immediate action, and wants you put together a fiscal policy response. Which fiscal policy action
would you recommend (expansionary or contractionary)? Explain your rationale with words.