CASE STUDY 1

Analyse the effect on the product market of falling business and consumer confidence in the economy using the Aggregate Expenditure (AE) model; and demonstrate how changes in the product market transmit into the money market and the foreign exchange market - and in turn affect the product market, evidencing the continuous flows between markets

AE model analysis - remember to explain the transition to the new equilibrium - discuss and illustrate.

Demonstrate how changes in the domestic product market transmit into the money market and the foreign exchange market.

money market and exchange rate market analysis - remember to explain the transition to the new equilibrium - discuss and illustrate

Demonstrate and discuss how in turn the changes in the money market and the foreign exchange markets affect the product market, evidencing the continuous flows between markets.

Note: All diagrams you present must be your own and not a copy from another source. You can draw the diagram on paper, take a photo and insert the image; alternately, you can use software to 'draw' your diagram.

CASE STUDY 2

As a consequence of the falling business and consumer confidence, evaluate the effectiveness of monetary and fiscal policy using the IS-LM model in addressing the resultant problem in the economy. Remember to identify the 'problem' in the economy that falling business and consumer confidence has caused.

Differentiate between fiscal and monetary policy.

Debate the merits of using fiscal or monetary policy to address the 'problem' that had occurred in the economy.

Apply the IS-LM model to demonstrate the effectiveness of fiscal and monetary policy to support your arguments.

Debate whether fiscal or monetary policy would be most appropriate to address the 'problem' you have identified in the economy. Use the IS-LM model to support your arguments. Hint: think about the slopes of the curves.

Note: The IS-LM diagrams you present must be your own and not a copy from another source. You can draw the diagram on paper, take a photo and insert the image; alternately, you can use software to 'draw' your diagram.