A) Explain how equilibrium is achieved in an economy with 5 markets. ( 15 marks)

B) In the Dombusch model the uncovered interest rate parity (UIP) condition is assumed to be hold continuously, that is, if the domestic interest rate is lower than the foreign interest rate then there need to be an equivalent expected rate of appreciation of the domestic currency to compensate for the lower domestic interest rate." Explain this statement.( 15 marks)

C) Based on IS-LM-bb model, explain the impact of the following on the market and justify the shift in bb curve when there is a/an:

i. Increase in budget deficit ( 10 marks)

ii.decrease in money supply ( 10 marks)