Topic: Global Macroeconomics

Order Description
PART A: Answer ONE question. Maximum word limit: 1000 words
1. Assume that an open economy is experiencing a stock market boom such that the level of output exceeds its full employment level. Using appropriate diagrams, examine the effectiveness of a contractionary monetary policy as a stabilisation policy tool under fixed and floating exchange rate regimes. Discuss any two problems that might affect the policy design and implementation of monetary policy.

2. Using the Central Bank balance sheet diagrams, evaluate how each of the following shocks affects a country’s ability to defend a fixed exchange rate.
a. An economic recession leads to a reduction in money demand.
b. Currency traders expect an appreciation in the home currency in the future.

Discuss possible ways to prevent exchange rate crisis.
3. Since 1983, the Hong Kong dollar has been pegged to the United States. Using the IS-LM-FX, explain how the following scenarios would affect the Hong Kong economy.

a. The US increases its money supply.
b. Hong Kong cuts government expenditure.

What would be the effect of scenario (a) and (b) on Hong Kong economy if it decides to float its currency?

 
1. Assume that an open economy is experiencing a stock market boom such that the level of output exceeds its full employment level. Using appropriate diagrams, examine the effectiveness of a contractionary monetary policy as a stabilisation policy tool under fixed and floating exchange rate regimes. Discuss any two problems that might affect the policy design and implementation of monetary policy. – 1000 Maximum word limit

2. Pick a country of your choice that was affected by the global financial crisis. Explain why the country was affected by the global financial crisis. Discuss the effect of the crisis on the country. Critically evaluate the effectiveness of policy responses to the crisis in that country. (Your answer should include an analysis of the main economic and financial indicators of the country from 2005 (before the crisis) to the current year). – 2000 words

 
1. Assume that an open economy is experiencing a stock market boom such that the level of output exceeds its full employment level. Using appropriate diagrams, examine the effectiveness of a contractionary monetary policy as a stabilisation policy tool under fixed and floating exchange rate regimes. Discuss any two problems that might affect the policy design and implementation of monetary policy. – 1000 Maximum word limit

2. Pick a country of your choice that was affected by the global financial crisis. Explain why the country was affected by the global financial crisis. Discuss the effect of the crisis on the country. Critically evaluate the effectiveness of policy responses to the crisis in that country. (Your answer should include an analysis of the main economic and financial indicators of the country from 2005 (before the crisis) to the current year). – 2000 words