1. Using IS/LM, aggregate demand and aggregate supply model of the economy, show that monetary policy is effective in the short run but it is neutral ( ineffective) in the long run. In the same context, identity conditions which you would recommend "activist" do under monetary policy.
2. Derive and explain IS and LM curve
3. Compare the effect of both an unanticipated and anticipated increase in the money supply upon a rational expectations model and a new Keynesian model.
4. Briefly outline why Baumol's "The Transactions Demand for Cash" is a further development in the Keynesian approach to the demand for money.
5. Explain how the quantity theory of money and the classical Cambridge approach evolved into two very different approaches with regard to the demand for money.