The economy has seen unemployment rate raise from 6% to 9.5%, the inflation rate decrease from 2.8% to 1.2%, and there has been a 24% decline in consumer spending and a 45% decline in investment spending in the same time period.

a) Given the above, what would you predict about the overall direction of the economy?

b) Explain the appropriate discretionary fiscal policy that the government should adopt, given the above condition.

c) Describe the appropriate monetary policy that the central bank should be operating, given the above condition.