Syldavia is experiencing a severe recession. The government steps in and pumps money into the economy. This is phase one. At the end of phase one, the leader of Syldavia realizes that the pump-priming done by his finance minister was not enough to bring the economy around and so instructs the central bank governor to conduct expansionary monetary policy in phase 2 immediately. Select a tool that the central bank may use to do this and explain how it would work. Then show both effects on the same diagram, clearly indicating which is phase 1 and which is phase 2. If at the end of phase 1, and during phase 2, the wage rate falls in Syldavia, show on a separate diagram what the economy would look like at the end of phase 2. The question calls for two diagrams. Anything more or less than this will result in zero marks. Explain what is happening in phase 1, phase 2a and phase 2b clearly

Syldavia is experiencing a severe recession. The government steps in and pumps money into the economy. This is phase one. At the end of phase one, the leader of Syldavia realizes that the pump-priming done by his finance minister was not enough to bring the economy around and so instructs the central bank governor to conduct expansionary monetary policy in phase 2 immediately. Select a tool that the central bank may use to do this and explain how it would work. Then show both effects on the same diagram, clearly indicating which is phase 1 and which is phase 2.

If at the end of phase 1, and during phase 2, the wage rate falls in Syldavia, show on a separate diagram what the economy would look like at the end of phase 2. The question calls for two diagrams. Anything more or less than this will result in zero marks. Explain what is happening in phase 1, phase 2a and phase 2b clearly