For each, please state whether or not an expansionary or contractionary policy is needed.

1. Assume the economy of the Croatia is experiencing a slump in aggregate

demand, and output in the economy is thought to be $10 billion less than what
would be produced at full employment. On the graph below, illustrate the Croatian
economy at its current level of output.

2. On the graph you drew above, identify the recessionary gap.

3. Assume that the Croatian government wishes to enact a fiscal policy that would
return the economy’s output to its full employment level. Identify the options
available to the Croatian government.

4. Slovenia has a problem with economic growth as their rGDP is expected to grow by .01% in 2022.
Using a fiscal policy, explain the impact of a correction to this problem using a diagram. Would this
fiscal policy be expansionary or contractionary?

5. Hungary is experiencing increasing levels of cyclical unemployment. Choose one fiscal policy the
Hungarian government could undertake to correct this problem and explain the impact using a
diagram.
6. Poland is currently dealing with increasing levels of inflation due to supply chain issues. Graph the
situation. Then give one monetary policy the Polish central bank could use to correct this problem
and explain the effects using a second diagram.

7. Bosnia has been looking for ways to improve their economy and has found that businesses have
not grown for 10 years. Suggest one monetary policy the central bank could enact to solve this
problem and explain the effects on the economy using a diagram.

8. With rising price levels across Croatia, the nation is calling for answers and solutions. What are
two things the central bank could do to answer the call? Explain the effects using a diagram.