Question
Every mark requires one fact/one point: 5marks = 5points stated QUESTION ONE (10 marks) Suppose that the Central Bank is able to target real GDP
Every mark requires one fact/one point: 5marks = 5points stated
QUESTION ONE (10 marks)
Suppose that the Central Bank is able to target real GDP when there is instability in either commodity demand or the demand for money. Explain how the Central Bank must conduct open market operations, as
(i) commodity demand rises
(ii) the demand for money increases
QUESTION TWO
a)Explain the evolution of Endogenous Growth theory and how this theory explains technological progress endogenously as opposed to being an exogenous factor according to Solow model.(5 marks)
b)Explain what is the "Solow residual". Discuss, how it is used to account for the long-term improvement in output per person in Malaysia. (5 marks)
QUESTION THREE
a) Define Aggregate Demand and explain TWO (2) factors why the AD curve is a negative slope. (5 marks)
b) Explain what is supply-side policy and how this policy can improve the economy. (5 marks)
QUESTION FOUR
a)What is supply shock? Using the AD-AS diagram show the effect of a positive supply shock on the economy.(5 marks)
b)What costs are associated with perfectly anticipated inflation? Do these costs change as the rate of inflation changes?(5 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started