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Pls do not handwrite the answer, this is for easy reading Question 4 a)Country Alpha has...

Pls do not handwrite the answer, this is for easy reading

Question 4

a)Country Alpha has a fixed exchange rate system and free capital mobility. Due to an economic recession and a trade deficit, it is pursuing an expansionary fiscal policy to improve the country’s balance of payments. Illustrate and discuss if this expansionary fiscal policy is effective to achieve the country’s economic growth and balance of payments.

b)Country Sigma is an open economy with a flexible exchange rate and it pursues a contractionary monetary policy which will lead to lower rental income and price level. Explain how this is possible.

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