1. In 2009-2010, when the economy was in a deep slump, the Fed had taken interest rates to zero (increase in money supply) and the Obama administration was arguing for a larger fiscal stimulus (increase in government spending and decrease in taxes).
Compare the effects of these two policies in terms of their implications for the current account. If policy makers are concerned about the current account deficit, discuss whether stimulatory fiscal policy or monetary policy makes more sense in this case.
You can draw an IS-LM-FX diagram to better understand the above problem.
2. What was Britain's reaction to the Bundesbank's (Germany's central bank) contractionary monetary policy in the 1990's? Please describe the events and use an IS-LM-FX diagram.
3. What is the Optimum Currency Area. What are the requirements? Give an example of a region that satisfies the OCA requirements and a region that does not satisfy the requirements.
4. What purpose the nominal convergence criteria of the Maastricht Treaty serve?