BEEM120_2022_23_FINAL_Main_Rubric_2
University of Exeter
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Business School
January 2023
MACROECONOMICS OF MONEY AND FINANCIAL MARKETS
Module Convenor:
Duration: 1 hour 30 minutes + 30 minutes upload time
No word count specified
This is an Open Book exam
Additional materials needed: None
Answer all questions. Questions are equally weighted.
Question 1
Outline a two-period model of consumption based on intertemporal behaviour.
Provide an interpretation for the consumption Euler equation and derive the
consumption function. Explain why Ricardian Equivalence holds in your model.
Question 2
Suppose that a central bank promises to pursue a policy of zero inflation. In the
context of the Barro-Gordon model, explain why such a promise is not credible.
Derive the rate of inflation when a central bank acts under discretion and explain why
it is possible to reduce inflation (on average) by appointing a conservative central
Question 3
Consider the Mundell-Fleming model in which a country operates a freely floating
exchange rate system and there is perfect capital mobility. Separately explain the
effects of monetary policy and fiscal policy on the macroeconomy.
End of paper
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