A Critically Oriented Academic Analysis of the Implications of an Expansionary and Contractionary Monetary Policy Through the IS-LM Balance of Payment Model

The aim of the assignment bellow is to critically discuss the implications of an expansionary monetary policy (highlighted in section 1) and a contractionary monetary policy (section 2) in a particular economy. The analysis will be conducted segueing the framework of the IS-LM-Balance of Payment model, which is considered to have a high explanatory power. Taking into account, the importance of exchange rate regimes and their effect on the implementation on each discussed policy, the paper will be strongly emphasise upon this factor throughout the assignment. A conclusion, summing up the main points discussed through the article will be incorporated in the end. Appendices, explaining the implication of the game theory, components of the IS-LM , as well as, the advantages and disadvantages of different exchange rate regimes are incorporated in the very end of the academic analysis