1.Discuss the effect of Monetary policy (MP), Investment saving (IS), and Aggregate Demand (AD) curves when the inflation rate decreases.

(7 marks)

2.Suppose a tax cut that had been anticipated by households and businesses doesn't happen. Interpret a new Keynesian analysis of the consequences of this 'event'.

(6 marks)

3.As the U.S. economy recovers from the recession of 2007-2009, stubbornly high unemployment is a concern. For each of the three business cycle models, the appropriate policy regime.(5 marks)

4.Analyse insights into the macroeconomic consequences of financial frictions arise from the new Keynesian model. (7 marks)

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