Question 1

Explain diagrammatically the difference between Yield-Curve Control (YCC) policy and Quantitative Easing (QE). This means that you will have to construct two separate diagrams, namely: one diagram for YCC and one diagram for QE.

Question 2

Debt financing of ever-increasing government spending combined with constant government revenue and a positive real interest rate is not viable if the economy is not growing. True or false? Explain.

Note. This question is about qualitative predictions of government debt. You need to establish the signs of the parameters emerging from the statement of the question and draw a diagram to indicate on which of the four quadrants the economy is located.

Question 3

This question refers to an economy in two different situations. Situation 0 (Initial situation) is described in Table 1 and Situation 1 (New situation) is described in Table 2. In both situations, potential output is Y = 2,000.

*Look at the photo attached for tables*

Concept Quantitative Information Consumption function C = 550 + 0.5 X (Y T) Taxes T = 100 Investment I = 50 Government purchases G0 = 100 Table 1 (Situation 0: Initial situation) Concept Quantitative Information Consumption function C = 550 + 0.5 X (Y T) Taxes T = 100 Investment 1' = 50 Government purchases 61 = 200 Table 2 (Situation 1: New situation)