Question: a) Using appropriate diagrams, explain foreign exchange operation, open market operation and sterilization under Portfolio Balance Model. (15 marks) b) In view of the Walras's

a) Using appropriate diagrams, explain foreign exchange operation, open market operation and sterilization under Portfolio Balance Model. (15 marks)

b) In view of the Walras's law, if n-1 markets are already specified. the specification of bond market would have been superfluous. Explain bond market equilibrium using IS-LM.bb model.(15 marks)

c) What is WaIras's Law. Explain how equilibrium is achieved in an economy with 5 markets.(15 marks)

d) The asset market in the Portfolio Balance Model is in equilibrium when all three assets market, that is, money market, the domestic and foreign bonds markets, clear at the appropriate domestic interest rate and exchange rate.' Explain this statement (15 marks)

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