(a)

Explain the difference between 'automatic stabilisation' and 'discretionary Stabilisation'.

(b)

Explain why a government may have difficulty in implementing discretionary stabilisation successfully.

(c)

Explain why monetarists would argue that control of inflation is the most effective method of achieving growth in the economy.

(d)

In terms of debt instruments, distinguish between the primary and secondary market and discuss the implications for liquidity if an instrument is not tradable on the secondary market.

(e)

Define the following terms associated with borrowing:

i.Residual maturity

ii.Euro bonds

iii.Strips

iv.Index-linked bonds

(f)

Describe the economic effects associated with a government using bills or bonds to borrow from overseas.