FISCAL MONETARY POLICY

Question 1

Adjustment by fiscal policy and monetary policy is needed in an open economy like Hong Kong to ensure both internal balance and external balance. For Hong Kong, it also wants to maintain its fixed exchange rate policy. Analyse and discuss the relative effectiveness of fiscal policy and monetary policy in an open economy if Hong Kong were faced with recession and deficit in balance of payment.  (20 marks) 300WORDS

Question 2

Compare fixed and flexible exchange rate systems. Explain and discuss why Singapore as a more advanced but also small, trade-dependent economy, prefers a flexible floating exchange rate system rather than a fixed exchange rate system, given the respective pros and cons of flexible and fixed exchange rates in theory. (20 marks)- 300WORDS

Question 3

(a) Discuss what each of the five stages of economic integration in the diagram below means.

(5 marks)

(b) State and identify the stage of economic integration in the diagram that the Association of Southeast Asian Nations of 10 nations (ASEAN) is at, as ASEAN6 has grown into ASEAN10 to include Cambodia, Laos, Myanmar and Vietnam (CLMV) as progress of ASEAN widening. Discuss whether ASEAN10 should deepen into further stages of economic integration given the challenge of CLMV being added.   (10 marks)  200WORDS

Question 4

Japanese cars proved more popular than American cars with Detroit as the car-making hub losing competitiveness. The result was that Japan strategically adopted a voluntary export restraint (VER) policy in 1981 to avoid an aggressive trade conflict with the US. Demonstrate and explain how VER was a wise or not wise choice in trade policy by Japan in hindsight.

(10 marks)  200WORDS

Answer preview

Question 1

During times of slow economic growth, Fiscal policy and monetary policy are used to stimulate the economic growth. Using monetary policy, the central bank can circulate money in the economy to stimulate economic growth…

(1200 words)