10.2.3ECONOMICS 3: ASSIGNMENT 2[100]

QUESTION ONE[20]

Critically evaluate the different lags that is experienced by a government in implementing fiscal policy. Include in your answer examples of these lags being experienced by a country of your choice.

QUESTION TWO[25]

Expectations plays an important role in the determination of spending (consumption).This dependence of consumption on expectations has in turn implications for the relation betweenconsumption and income.

In terms of the above statement discuss theconnection between consumption and income.

QUESTION THREE[30]

One can think of an economy as being constantly hit by shocks. Assume an economy is faced by the independent shocks listed below. Use the aggregate demand - aggregate supply model to examine the impact of each of these shocks on the economy.

3.1 There are shifts in consumption following a decrease in consumer confidence in the economy(15)

3.2 There are shifts in investment following an increase in investor confidence in an economy.(15)

QUESTION FOUR[25)]

A policy mix is the combination of a country's monetary policy and fiscal policy. In practice they are often used together as these two channels influence growth and employment.

In terms of the above statement, evaluate the policy mix in your country and its success in achieving the economy's desired macroeconomic objectives.