What is the crux of the debate between the Post Keynesian approach and the Classics on the role the central bank plays in creating money? (7 Marks) (Your word limit for answering this question: 90 words) Q2B: In one country, the current account deficit is at the level of 10 billion dollars. This deficit will increase by $2 billion every year in the next five years. This country meets only half of the deficit from its financial account (FDI and other short term portfolio investments) each year. The central bank's foreign currency reserves are $5 billion and will increase by one billion a year in the next five years. If the country applies a fixed exchange regime, what would be your expectation for the country's foreign exchange market the next five years? (7 Marks) (Your word limit for answering this question: 55 words) Q2C: Suppose that the price of sterling in terms of the dollar has risen over a 12 month period year. What would you expect the effects of that rise in the sterling dollar exchange rate to be on: (16 Marks, 2 Marks Each) (1) the volume of UK exports: (Your word limit for answering this question: 65 words) (II) the value of UK exports: (Your word limit for answering this question: 60 words) (iii) the price of UK imports: (Your word limit for answering this question: 50 words) (iv) the volume of UK imports : (Your word limit for answering this question: 20 words) (v) the value of UK imports: (Your word limit for answering this question: 45 words) (vi) the general level of prices in the UK (Your word limit for answering this question: 75 words) (vil) the UK balance of trade : (Your word limit for answering this question: 25 words) (viii) the UK capital account. (Your word limit for answering this question: 50 words)
