Question

Anyone please help me draw AS AD diagram to illustrate the impacts of the adjustment in its fiscal policy of Venezuela . And explain please

Thank you so much

Answer 1

Venezuela faces problem of acute shortage of supply of food and soaring inflation with rise in crime activities .

To solve this problem government adopts contractionary fiscal policy by lowering government expenditure and increasing taxes to decrease aggregate demand of goods and hence cause fall in prices subsequently . This will lift economy from rising inflation and stabilise at normal rate of output.