Keynesian multiplier framework for an open economy

Using the Keynesian multiplier framework for an open economy and assuming a constant marginal propensity to consume, describe what may happen to economic output in the UK following:

Keynesian multiplier framework for an open economy
Using the Keynesian multiplier framework for an open economy and assuming a constant marginal propensity to consume, describe what may happen to economic output in the UK following: 1) a reduction in the tax rate 2) an appreciation of the pound against the euro.

Explain how an increase in government spending might influence employment, using the aggregate demand model in a closed economy. In your answer, discuss why higher government spending may lead to crowding out.

Facing recession fears, the Bank of England Monetary Policy Committee decides to cut the base rate of interest. Using the transmission mechanism and the IS diagram, explain what the merits of this decision are, and describe an alternative policy instrument that is available to the Bank of England.

Using the inflation targeting model and reproducing Figure 1 below in your answer. Show how interest rate adjustments designed to reduce an above-target level of inflation may give rise to unemployment.

PART 2
Consider the supply and demand of vegan leather, made from materials that are not animal-based. Using the demand and supply diagram, show the potential change in the price of vegan leather following these two events:

1) Growing consumer preference for cruelty-free products

2) Discovery of new technology which lowers the costs of vegan leather production In your answer, assume a perfectly competitive market for vegan leather. Describe one limitation of making this assumption in understanding how the price of vegan leather is determine.

Using appropriate diagrams, explain how firms maximise profits in the long run under perfect competition. Further, how does this differ from monopolistic competition, and what impact does monopolistic competition have on consumers?

Using the demand and supply diagram in a model of perfect competition, explain how a reduction in UK tariffs on alcoholic beverages imported from the USA might impact (a) UK whisky producers, and (b) UK consumers. In your answer, comment on the assumptions that need to be made in order to model these effects of trade liberalisation.

In a harbour, two captains run glass bottomed boats for tourists to observe marine wildlife. Unless the engines that power these boats stop polluting the water then its marine wildlife will be destroyed. Construct a payoff matrix and explain why the mayor of the harbour town might need to curb this pollution.

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