support@essaywritingexpert.orgECON1085 International Monetary Economics
Exam Practise questions
Topic 5: Internal and external balance
Question 1
(i) An economy is in internal balance but have a Current Account
deficit. Its IB schedule is steeper than the EB schedule. Explain in what
situation you would be able to restore external balance without disrupting
internal balance.
(ii) An economy is in external balance but have an unemployment
situation. Its IB schedule is steeper than the EB schedule. Explain in what
situation you would be able to restore internal balance without disrupting
external balance.
(iii) Explain why the external balance is upward sloping.
Question 2
(i) An economy is in internal balance but have a Current Account deficit. Its IB
schedule is steeper than the EB schedule. Explain in what situation you would
be able to restore external balance without disrupting internal balance.
(ii) An economy is in external balance but have an unemployment situation. Its IB
schedule is steeper than the EB schedule. Explain in what situation you would
be able to restore internal balance without disrupting external balance.
(iii) According to the Swan model, the order in which policy goals are pursued will
determine whether policy assignment is stabilising or destabilising. Do you
agree?
Question 3
(a) Assume that Singapore is currently achieving internal balance, but
experiencing a trade surplus. Also assume that Singapore faces a relatively
elastic IB schedule and a relative inelastic EB schedule. Explain how and
why an attempt to restore external balance will disrupt internal balance and
how internal balance would be restored.
(b) Assume that Malaysia is currently achieving internal balance, but
experiencing a trade deficit. Also assume that Malaysia faces a relatively
inelastic IB schedule and a relatively elastic EB schedule. Explain how and
why an attempt to restore external balance will disrupt internal balance and
how internal balance would be restored.
Topic 6: IS-LM-BP
Question 1
Using the ISLMBP model, explain the following situation:
(a) Explain the effects that a decrease in taxes has for the domestic economy with
zero capital mobility under a fixed and a flexible exchange rate system.
(b) Explain the effects that an increase in money supply has for the domestic
economy with perfect capital mobility under a fixed and a flexible exchange
rate system.
Question 2
Using the ISLMBP model, explain the following situation:
(i) Assume zero capital mobility; explain the effects that an increase in
government expenditure has for the domestic economy under a fixed and a
flexible exchange rate system.
(ii) Assume perfect capital mobility; explain the effects that an increase in money
supply has for the domestic economy under a fixed and a flexible exchange rate
system.
Question 3
(i) Assume that Singapore is currently achieving internal balance, but experiencing
a trade surplus. Also assume that Singapore faces a relatively elastic IB schedule
and a relative inelastic EB schedule. Explain how and why an attempt to restore
external balance will disrupt internal balance and how internal balance would be
restored.
(ii) Assume that Malaysia is currently achieving internal balance, but experiencing a
trade deficit. Also assume that Malaysia faces a relatively inelastic IB schedule
and a relatively elastic EB schedule. Explain how and why an attempt to restore
external balance will disrupt internal balance and how internal balance would be
restored.
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