Compare the effectiveness of monetary and fiscal policies under
fixed and flexible exchange rate regimes(temporary & short
run). How do they differ in their effects on CA?
What are the effects of temporary monetary and fiscal policies
under flexible vs. fixed exchange rate systems in the short run?
Show using both the FX and Money Market graphs and the
AA-DDmodel
There are two major exchange rate systems that a country can
adopt: flexible and fixed. Historically we have had each of these
in the U.S. Debate the advantages and disadvantages of each of
these two systems. Which one do you think is superior?
You have received a number of questions regarding fiscal,
monetary, and exchange rate policies and how they can be used to
stimulate and sustain economic growth in Africa. Prepare a paper
that you will distribute responding to these questions.
Hint: Discuss each of the policies using the demand and supply
side effects of the various policies also the limitations of each.
Each policy discussion is 10 marks
[30 marks]
Discuss the conditions under which fixed exchange may prove
superior to flexible exchange rate. Be sure to discuss the set of
operations (and their difficulties) necessary to maintain a fixed
exchange rate. 50 points