INSTRUCTIONS
Answer ONE QUESTION FROM EACH BLOCK, three questions in total. No individual answer may exceed 400 words in length. The total wordcount for all answers may not exceed 1200 words.
Each question you answer is weighted equally towards the overall grade for the exam.
BLOCK A
Answer one of the following questions in no more than 400 words.
A.1. Is it helpful to think of the national economy as a big household? Why or why not?
A.2. How might economic growth undermine economic development?
BLOCK B
Answer one of the following questions in no more than 400 words.
B.1. ‘Controlling inflation is a more important policy objective than ensuring full employment’. Critically assess this statement.
B.2. ‘Government should use fiscal policy to try to smooth out the peaks and troughs of the business cycle’. Critically assess this statement.
BLOCK C
Answer one of the following questions in no more than 400 words.
C.1. Imagine that you are economic advisor to the government of a middle- income developing country. Your government is trying to assess whether it should use protectionist policies to help domestic manufacturing industries to develop. Provide a summary of potential advantages and disadvantages of such policies, and a recommendation of whether they should be employed.
C.2. Imagine that you are economic advisor to the government of a high-income highly developed country. Your government is facing a persistent current account deficit (every year for the past 20 years) and is trying to assess whether this can be maintained indefinitely. Evaluating the benefits and risks of a sustained current account deficit, advise the government what its long-term objectives should be for its balance of payments.