Intermediate Macroeconomics

DescriptionAnswer both questions – this is question 1 of 2. It is recommended that you submit a PDF and check that your equations and diagrams are showing correctly. Question 1. Assuming capital mobility is high but imperfect and an absence of inflation, show how the efficacy of a quantitative easing policy depends on the choice of exchange rate regime. Demonstrate whether your conclusions are robust to different assumptions about the degree of capital mobility.Question 2. (a) Employ the Solow model of economic growth in effective labour terms to evaluate the long and short run effects of a rise in the investment rate; (b) Show how the time inconsistency problem may generate political business cycles.Essay Requirements:The essays seek to assess:1. Your understanding of the material covered in the class;2. Your ability to present material coherently;3. Your capacity to write effectively and concisely under a length constraint.Essay writing allows you to display your knowledge of one aspect of a subject and demonstratesyour capacity to express yourself in written communication. Essays should be written in a reportstyle, and aim for an objective, analytical style. Subheadings should be used to define differentsections of the essay. Paragraphs should be used to delineate different ideas within sub-sections.Bullet points should be used when appropriate, for example in lists. The essay should have thefollowing structure:1000 words question 11000 words question 21. An introduction, which should be clearly denoted by a sub-heading. The introductionhas two purposes. First, to tell the reader what your essay shows and what models or 22EC2503 Intermediate Macroeconomics | 2020 /2021techniques of analysis you have used to get those results; in other words, to signpostthe reader through the essay. Second, to define up-front any key terms used.2. A theoretical section detailing the models and theories used, including theassumptions upon which they are founded, and which should also be clearly denotedby a sub-heading. This maps directly to the first learning objective of the course.3. An applied section that shows how the theory developed in the previous section canbe applied to a practical policy making issue, which may either be explicitly given inthe question or should otherwise be drawn from your own knowledge of how theparticular theory may be applied in a contemporary policy-making context. This mapsdirectly to the second learning objective of the course.4. A conclusion which should briefly summarise your key findings and identify any of thelimitations of your models and policy analysis (perhaps by reference back to theunderpinning assumptions) and how these may be overcome in more advancedliterature. This maps directly to the third learning objective of the course.