2 pages
The case:
Madagascar’s economy was driven by agriculture's production and exports. Economically speaking, the country is suffering from inflation and slow growth.
According to you, what could be the short-run consequences of an increase in the level of output on the direct exchange rate with USD?
Imagine that this policy has to be structural, ie: a permanent increase in the level of output. How this long-term perspective may change your previous answer? (5 points)
At the beginning of the 2010s the governement try to increase growth thanks to an agressive monetary policy. It took time for the entrepreneurs and the population to take into account the new price policy.
What is the consequence of a rapid adjustment of the level of prices on the nominal exchange rate? (5 points)
Entrepreneurs and the population are not reacting rapidly to monetary policies announcements and to economic news.
How does it change your previous answer? (5 points)
