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Economics

Word Limit: 1750 words.A. Assume that you are a member of the Bank of Japan (30]) board of governors in1998. The president of Bo] announces that he is thinking of applying QuantitativeEasing (QE).1) In your view, what could be the reasons behind this decision?(20 marks)2) What are the potential advantages and disadvantages of QE? Discuss critically.(20 marks)B. Assume that the Minister of Finance is responsible for fiscal policy and the CentralBanker is responsible for monetary policy. Each policy maker has two choices; eitherto follow a contractionary (tight) or an expansionary (easy) policy. In 2005, thechoices were as described in Table A (with the numbers within the matrix showingthe payoffs to each policy maker):Table A-2005Minister of Finance-_-Central BankerIn 2010, the choices were as described in Table B:Table B-2010Minister of Finance-_-Central Banker1) What is/are the Nash equilibria in each year? Explain your answers.(40 marks)2) Assume that you are a Government Advisor and you are asked to give a policyreport. What will you write in such a report regarding the tools for the chosenpolicy combination in each year? Discuss the advantages and disadvantages of thepolicy tools in each case.(20 marks):