A You Are the Chief Economic Adviser in a Small

question 34

Essay

a. You are the chief economic adviser in a small open economy with a floating-exchange-rate system. Your boss, the president of the country, wishes to increase the level of output in the short run in order to win reelection. Do you recommend using expansionary or contractionary, monetary or fiscal policy?
b. Use the Mundell-Fleming model to illustrate graphically your proposed policy. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium levels; iv. the direction the curves shift; and v. the new short-run equilibrium.

---

Definitions:

Just in Time

The Just in Time (JIT) methodology is an inventory management strategy that aims to reduce waste and increase efficiency by receiving goods only as they are needed in the production process.

Suppliers

Entities or individuals that provide goods or services to other entities or individuals, typically within a business or manufacturing process.

Short-term Financing

Refers to the obtaining of loans or other monetary support for a period of typically less than one year, to address immediate financial needs.

Long-term Financing

Funding obtained for a time frame exceeding one year in duration, typically used for acquiring or investing in assets that have a long useful life.