1) Use the IS-LM-PC model to illustrate how the economy adjusts to a contractionary monetary policy in response to a positive output gap. Describe the transmission mechanism of the policy intervention and explain what happens in the medium run to output, unemployment, inflation and the real interest rate. [12 marks]

2. Suppose both the Fed and the ECB always use the Taylor rule. What happens to the EURUSD exchange rate (number of dollars per euro) today if: a. the inflation differential, which is defined as inflation rate in Europe - inflation rate in USA, increases today? b. it is announced today (time t) that the U.S. real GDP growth rate will increase at t+1?

1- What are the implications of vertical and horizontal IS curves? Suppose that in Country A, IS curve is vertical, and in Country B, IS curve is horizontal By using the IS LM model discuss what it implies about the effectiveness of monetary policy in these countries

1. (a) Derive and carefully explain the IS-LM model. (b) In the context of the IS-LM model, analyse the effects of (i) a rise in taxation; and (ii) contractionary monetary policy.

The central bank of the Dominican Republic decides to pursue acontractionary monetary policy. Provide a table with the money supply data and inflationrate for the Dominican Republic for 2014 - 2019.(c) Based on the data from the Dominican Republic, do you agree with thecentral bank’s decision to pursue a contractionary monetary policy? Explain why orwhy not. (d) Identify a newspaper article from the Dominican Republic that provides asituation in which a contractionary monetary policy was implemented by the centralbank. Ensure that you provide a screenshot of the article in your submission. Thescreenshot should include the name of the publication, date of publication and nameof the article.(i) Identify the contractionary monetary policy used in the article. (ii) Carefully explain, in as much detail as possible, how the chosen action from thearticle will impact the money market. (iii) Illustrate using the money market diagram, the overall impact of the chosen actionfrom the article on…

)The central bank of your assigned Caribbean country decides to pursue anexpansionary monetary policy.(i) Identify one possible action they could take.  (ii) Carefully explain, in as much detail as possible, how the chosen action will impact the money market.  (iii) Illustrate the overall impact of the chosen action on the money market.(iv) Identify a newspaper article in your assigned Caribbean country thatprovides a situation in which an expansionary monetary policy wasimplemented by the central bank. Ensure that you provide a screenshot of the article in your submission.

The central bank of Trinidad and Tobago decides to pursue acontractionary monetary policy. Provide a table with the money supply data and inflationrate for Trinidad and Tobago for 2014 - 2019.Based on the data from Trinidad, do you agree with thecentral bank’s decision to pursue a contractionary monetary policy? Explain why orwhy not.

Can you answer all questions and justify your answers

2. Based on the IS-LM-PC model for a closed economy studied in class, which of the following statements is correct? a) In the medium run monetary policy can only be used to control inflation, but it will not affect production. b) In the medium run, fiscal policy can only help to increase or decrease interest rates, but it will not affect production. c) Both monetary and fiscal policy can't be effectively uscd to increase production in the short run. d) All of the above.

Explain in detail the process of Monetary Policy transmission of a decrease in the cashinterest rate. Use relevant graphs to describe how a Central Bank’s action on the interest cashrate ripple through the economy and lead to the target policy goal. (Three connected diagramsshould be used: (1) money supply and demand (2) investment demand schedule (3) AS/ADdiagram. Interest rates is the variable that connects the first and second diagram).