The Global Economy and Financial System
Assignment
1) Using an AS/AD economic model illustrate and explain how monetary policy and fiscal policy can be used to influence the level of economic activity and the price level.
2)
- All member state of the Eurozone lose monetary sovereignty
- The Fiscal Compact limits national independence regarding the implementation of fiscal policy
a) Explain what the Fiscal Compact is.
b) Explain the purpose of the Fiscal Compact and why it was considered necessary.
c) Some argue that the Fiscal Compact is excessively restrictive regarding the formulation of fiscal policy at the national level. Would you agree/disagree? Explain your answer.
d) The loss of monetary sovereignty could be a major handicap for Eurozone countries if they were struggling with recession. Discuss this point and indicate whether you agree or disagree.
3) The current monetary policy of the European Central Bank (ECB) is referred to as "quantitative easing".
a) Explain the nature of this policy and how it is being implemented.
b) Explain clearly the objectives of this policy (ie what is the ECB trying to achieve).
c) Evaluate the success of this policy (ie to what extent have the objectives been achieved since the policy was begun).
Outcomes
- understand the nature of European economic integration and critically evaluate the implications for member states economic sovereignty.
- A critical evaluation of macroeconomic policy at home and abroad.
References:
- ECB
- European Commission and the fiscal compact