Monetarist Model - Macroeconomic behaviour and Systems - Past Exam, Exams of Macroeconomics

Download Monetarist Model - Macroeconomic behaviour and Systems - Past Exam and more Exams Macroeconomics in PDF only on Docsity! 1 ARHOLIADAU EXAMINATIONS Mai / Mehefin 2010 May / June 2010 EC30320 – MACROECONOMIC BEHAVIOUR AND SYSTEMS Time allowed: TWO hours. Answer THREE questions. All questions, and their corresponding parts when appropriate, carry equal marks. Choose at least ONE question from EACH SECTION. SECTION A Question 1 a) Derive the IS curve stating any assumptions you made. Explain clearly the factors that determine the slope of the IS curve. b) Using the IS-LM model explain, in detail, the concept of ‘crowding out’. Discuss the factors that determine the extent of crowding out. c) Using the IS-LM model, explain the concept of the ‘liquidity trap’. Discuss the relevance of the concept to the Great Depression. Question 2 Critically assess the main differences between the Keynesian model of consumption and the models developed by Friedman and Modigliani. Discuss how Friedman’s Permanent Income Hypothesis can explain the ‘consumption puzzle’. Question 3 a) Explain what the supply of money is made of and derive the money multiplier. Clearly state any assumptions you make. b) Describe three instruments of monetary policy. Discuss how a central bank can affect the money supply using these instruments. Question 4 a) Critically appraise Minsky’s financial instability hypothesis. Using this model, evaluate how changing macroeconomic conditions can affect the overall fragility of the economy. b) Discuss the relevance of Minsky’s financial instability hypothesis to the current global financial crisis. Turn Over