1. Explain the differences between Classical and Keynesian models of the economy. What are the implications for monetary policy regarding these differences?

a. Describe the Bahamian monetary and financial environment (The Bahamas is not industrialized, it is dependent on the Tourism Industry, its financial sector is predominantly foreign owned, and there are issues of balance of payments). Explain why traditional, Classical, or Keynesian policy prescriptions may be considered inappropriate for The Bahamas.

Answer all questions clearly and thoroughly. Each question is worth 50 points.