Complete the following table describing the short-run...

Complete the following table describing the short-run effects of specific macroeconomic policy actions with $\mathrm{a}^{-}+$" denoting an increase in the variable in each column heading and a "-" denoting a decrease ( 20 points; 1 point each).
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Key Concepts

Macroeconomic Policy Actions

These refer to the deliberate interventions by a government or central bank aimed at influencing economic conditions. Such policies typically include fiscal measures (like changes in government spending and taxation) and monetary measures (such as altering interest rates or adjusting the money supply), each designed to modify aggregate demand and stabilize the economy in the short run.

Fiscal Policy

Fiscal policy involves modifications to government spending and taxation to influence economic activity. In the short run, expansionary fiscal policy (increasing spending or cutting taxes) can boost aggregate demand, increase output, and potentially raise the price level, while contractionary fiscal policy has the opposite effect.

Monetary Policy

Monetary policy encompasses actions by a central bank to manage the money supply and interest rates. An expansionary monetary policy, for instance, lowers interest rates or increases the money supply to encourage borrowing and spending, thereby increasing aggregate demand and output in the short run, whereas contractionary monetary policy works to cool down an overheated economy.

Aggregate Demand and Supply Framework

This framework captures how changes in aggregate demand (through fiscal and monetary policies) affect key economic variables such as output and the price level in the short run. Policy actions typically shift the aggregate demand curve, leading to adjustments in equilibrium output and prices, while the aggregate supply may be relatively sticky in the short run, resulting in noticeable changes in these variables.

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