a. In response to the COVID-19 recession in 2020, the United States used a combination of large-scale fiscal policy expansion (e.g. the CARES Act1 of 2020 and the American Rescue Plan of 2021) and monetary policy expansion by the Federal Reserve. Suppose that in January of 2020- right before COVID- 19 pandemic hit, the U.S. economy was under full-employment. Use the Aggregate Demand and Aggregate Supply analysis (diagram & written analysis) in your answer to analyze the short-run and long-run effects of the combination of these two polices on price level, P and real output, Y.
