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Use AS/AD diagram to show tools of a discretionary fiscal policy in response to a positive...

Use AS/AD diagram to show tools of a discretionary fiscal policy in response to a positive aggregate demand shock. Comment briefly.

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An discretionary fiscal policy will be an increase in tax or decrease in the government expenditure. If the demand in the market increased it will create an inflation in the market and a fiscal policy in that situation will shift the aggregate demand curve to teh left and the new equilibrium will be at a lower price and lower quantity.

here, the demand after the positiive supply was at AD after the fiscal policy measure it will be a back to the new equilibrium point B.

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