Section A

You must answer ALL questions in this section

1. Explain (with the aid of two diagrams using the IS/LM/BP analysis) the

effectiveness of expansionary fiscal policies as well as ease monetary policies

in an open economy with flexible exchange rates and perfect capital mobility.

(25)

Monetary Policy is effective and Fiscal Policy ineffective.

Fiscal Policy

i

LM

6.25

 E’

5.0

BP

E

IS’



 IS

 0 Y

Yn Yf

Monetary Policy

i

LM



LM’

E F



5.0

BP



Expansionary fi...
RSE4801 Assignment 4 (COMPLETE ANSWERS) 2023 (745394)- DUE 11 October 2023
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