1.
Fiscal Policy
1. What is Fiscal Policy? Explain its tools and objectives.
2. Discuss the effectiveness of fiscal policy under different economic conditions (e.g.,
during a recession or high inflation).
3. Explain the concept of fiscal deficit. How is it measured? Discuss its implications.
4. What is the Government Budget Constraint (GBC)? Derive and explain its components.
5. Explain the role of government spending (G) and taxation (T) in managing aggregate
demand.
2. Monetary Policy
1. What is monetary policy? Discuss its tools and objectives.
2. Explain the transmission mechanism of monetary policy. How does it impact output and
inflation?
3. What are the challenges in implementing monetary policy in an open economy?
4. Describe the effect of changes in the money supply on the interest rate and output in the
IS-LM framework.
5. Explain the Liquidity Trap and its implications for monetary policy.
3. IS-LM Model and Policy Analysis
1. Derive and explain the IS curve and LM curve. Discuss their slopes and shifts.
2. Explain the IS-LM model with respect to the impact of fiscal and monetary policies.
3. How does fiscal policy affect output and interest rates in the IS-LM model?
4. Discuss the effectiveness of monetary policy under different shapes of the IS and LM
curves.
5. Examine the conditions under which fiscal policy is more effective than monetary policy.
4. Debt, Deficits, and Government Budget
1. What is Ricardian Equivalence? Explain its implications for fiscal policy.
2. What are the different types of deficits (fiscal, revenue, primary)? Explain their
significance.
3. How does the government finance its deficit? Discuss the implications of running budget
deficits.
4. Explain the concept of government debt sustainability. How does it relate to economic
growth and interest rates?
5. Policy Coordination
1. Discuss the coordination of fiscal and monetary policy. How should these policies be
coordinated to ensure macroeconomic stability?
2. Explain the conflict between fiscal and monetary policies in an open economy.
6. Policy Challenges
1. What are the challenges of implementing effective fiscal and monetary policies in
developing economies?
2. Discuss the role of inflation targeting in monetary policy. How does it affect economic
stability?
3. How can fiscal policy be used to control inflation and unemployment in the short run?