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25 marksMonetary Theory and Policy

CAPE Economics Unit 2 · 2007 · Paper 2 · Question 4(a)

Question 4 focuses on monetary policy mechanisms via liquidity preference theory and fiscal policy instruments.

Using a graph showing the theory of liquidity preference, explain how monetary policy can be used to increase the level of output and employment in an economy.

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Other parts of this question

  1. 4(b)Discuss the fiscal policy tools available to Caribbean countries that can be used to increase and decrease output and employment.[25 marks]

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