1) Monetary policy and fiscal policy both affect investment, particularly business fixed investment, and housing investment. Discuss.

(6 markah/marks)

2) Show graphically, the short-run and long-run effect of a monetary policy expansion when both exchange rates and prices are flexible, and capital is perfectly mobile. What happens during the period of adjustment from the short to the long run?

(10 markah/marks)

3)What are the short-and long-term volume effects of an exchange depreciation?

(4 markah/marks)

4) Discuss why there is a debate concerning how monetary and fiscal policy can best used to exit from the Global Economic Crisis of 2007-2009.

(7 markah/marks)

5) Explain the difference between Rational Expectations and Perfect Foresight.

(6 markah/marks)

7) The real business cycle approach builds models of a dynamic economy in which real shock are propagated. Discuss.

(7 markah/marks)