Question 1 A. With the aid of diagrams, distinguish between cost push inflation and demand push inflation. B. Examine FOUR (4) effects of inflation on the economy of a country. Question 2 A. Compare TWO (2) methods of calculating gross domestic product. B. Assess the usefulness of these statistics in indicating changes in living standards. Question 3 A. State the difference between monetary and fiscal policy. Give an example of cach. B. Imagine that the US and Europe maintain a fixed exchange rate between them. If inflation in the US is 3% and in Europe it is 1%, what would happen to the trade balance between these two countries? Can they maintain their fixed exchange rates forever? Discuss the above scenario and use examples to clearly explain your points. Take into consideration the matter of fixed exchange rate and compare it with other forms of exchange rates. C. Differentiate real income and nominal income. Question 4 Goods Exports $40 Goods Imports -$30 Services Exports $15 Services Imports $10 Investment Income -$5 Net Transfers $10 Capital Inflows $10 Capital Outflows -$40 Official Reserves $10 A. Use the information in the Table above to calculate the following: i. The current account balance ii. The capital account balance B. Distinguish between balance of payments and balance of trade. C. Outline the economic significance of a current account deficit. D. Outline TWO (2) measures a government may employ to correct a current account deficit. E. Outline the THREE (3) fundamental determinants of exchange rates? Question 5 A. Explain why the barter system of exchange has never totally disappeared from the local economy or the international economy. B. Describe TWO (2) functions of money? C. Explain how certain characteristics of money support the functions of money? D. Name THREE (3) policy tools that a Central Bank can use to constrain the rate of inflation. Explain how ONE (1) works to accomplish its objective