Question 1
In an open economy with flexible exchange rates, monetary policy is more effective than fiscal policy in the short run. 200words
Question 2
A country with a fixed exchange rate always gives up control of its monetary policy. 200words
Question 3
In Fisher’s Two-Period Consumption Model, a decrease in the interest rate increases consumption in the current period. 200 words
Question 4
Consider an economy that is initially at full employment level. In order to encourage innovation and entrepreneurship, suppose that the government provides tax breaks to newly formed small-medium size businesses, and subsidises investment on new technologies.
Using the IS-LM-PC model for a closed economy, discuss the effects of these policy changes: a) in the short-run; and b) in the medium-run with a central bank policy rate adjustment. Your discussion should make explicit reference to diagrams that illustrate adjustment dynamics.
: 600-word
Question 5
a) In 2017-18, as part of Emmanuel Macron’s proposed labour reforms, the French government tightened the controls on the unemployed and increased penalties against those who fail to look hard for a job. Additionally, the reforms gave small companies in particular more freedom to negotiate working conditions with their employees, rather than being bound by industry-wide collective agreements negotiated by trade unions.
How would you expect this event to have affected the natural rate of unemployment in France? Explain in words and illustrate graphically using the WS-PS Model.
300-word
b) Consider an economy that is initially at full employment level. Suppose that an unforeseen stock market crash lowers the wealth of many and creates uncertainty around the future of the economy. Using the Okun’s law and the Phillips curve, explain the short-run fluctuations in an economy around the medium run equilibrium following this change in the market mood and confidence 300 word .
