Contents

• This papers answers following questions -
• Answer the following questions with appropriate diagram and using AD-AS model, Money market, aggregate expenditure model, and forex market (as required). For part a, b and c appropriate diagrams are MUST. Else points will be deducted.
• When ECB went out for bail out then what was expected to happen to the interest rate in Greece? (10 points)
• Comment on the expected outcome of this policy on behalf of ECB. Provide diagram and detailed explanation on output and prices. (10 points)
• If government of Greece also increases (assume) the expenditure (expansionary fiscal policy) then what do you think can potentially happen to prices? Provide the relevant diagram and explain your answer.(10 points)
• Overall do you think that bail out of Greece is healthy policy from the perspective of ECB? Answer this one in context of the Case study. ( 5 points)
• Explain why a group of economist thinks that a common currency like Euro for the region is not a good idea. Restrict your answer to the concepts discussed in the class and the case study. Page limit is one page. (5 points)

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