ECONOMICS- Exchange Rate
Suppose an economy under fixed (pegged) exchange rates is currently facing:
(i) a balanced current account (NX = 0),
(ii) a negative output gap (excess unemployment), and
(iii) a balanced budget.
(a) Using an NX/ (S-I) model depict the above situation in relation to the internal and external balance diagrammatically.

(b) Now suppose as an advisor to the government your recommendation is to employ an expenditure-changing policy to attain the Internal Balance. Explain in details what this policy is made up and what the consequences of your recommendations will be. Show diagrammatically and explain fully.

(c) In light of your answer to part (b) would you agree with this statement? “A trade deficit and low savings go hand in hand.” Evaluate fully.

(d) Defend this proposition “attaining the two policy objectives of internal and external balance requires two polices”. Explain and illustrate diagrammatically.

C. A business plan is a business’s roadmap for the future.

Explanation:

We are given 4 statements and we have to chose the correct statement. Let's analyze these statement one by one.

A. Businesses do not need to document a business plan.

Every business whether small or large must create a business plan. In fact, one of the most important thing for a business to be successful is its detailed business plan which must cover all the important aspects of the business e.g. pricing, revenue model, customer demographics etc. Therefore, option A is NOT a correct statement

B. Established businesses do not create a business plan.

It is equally important for an established business to have a business plan as it is for a startup. Business plan is a vision of the future. If a established business has a well defined business plan, chances of their success and chances of them achieving their goals will be significantly more. Therefore, option B is NOT a correct statement

C. A business plan is a business’s roadmap for the future.

This a true statement. Business plan is termed as a blueprint of success for the business. This means, a business plan lists all the ways, methods by which a business will sale its services/products and achieve its goals set for the future. Therefore, option C is a correct statement.

D. A business plan guarantees a business’s success.

It is true that a well formulated business plan increases chances of success, but it does not guarantee success. This is because there are many other factors for determining the success, one of which is execution of the business plan and ideas. If the business plan is not properly executed, it will be of no use. Therefore, option D is NOT a correct statement.

answer; (a) searching for information can be done quickly;

answercontrol is returned to method c;