The Scenario:The chief of staff of a newly elected government has just contacted you to help advise it onhow best to design their economic policy approach. The government, led by PresidentBeatriz Benevolente of the left-leaning National Freedom Party (NFP), has been elected to afive-year term. President Benevolente is the first democratically elected president in morethan 20 years. The nations democratization came after two decades of military rule, wherethe presidency was rotated among the four branches of the armed forces (navy, army, airforce, marines).However, economic mismanagement by the outgoing military authoritarian regime resultedin a major macroeconomic crisis (including hyperinflation that reached 1,000%, a currencycrisis that saw the nations currency devalue from 5 soles to 500 soles per pound sterling,massive capital flight and de-investment, and an economic retraction of 20 percent lastyear) that led to mass riots throughout the nation and to the nations elites opposing acontinuation of this regime. The military agreed to step down and reinstate the nationsdemocratic constitution, including its presidential system and single chamber legislaturewhose members are elected across 20 nation-wide districts according to proportional rule.The developing nation is small, comprised of just 5 million people who are mainly employedin manufacturing and agriculture. The nation suffers from high inequality, thanks to thelarge numbers of urban and rural poor that engage in informal or itinerant work. Thenations socio-economic elites control large manufacturing enterprises, large tracts of land,and mineral wealth. The nations small but growing middle class mainly holds managerialpositions in the manufacturing industry, owns small businesses in the services sector, orwork in the nations sizeable public sector (bureaucracy, schools/universities, healthcaresystem). There is a small but sizeable urban and agricultural working class that hold formaljobs in the nations manufacturing and agricultural industries and is unionized.President Benevolentes NFP holds 40% of the seats in the 100-member national congress.Drawn from both the nations agricultural and manufacturing workers, NFP voters rangefrom center-left to radical left in their economic and social policy preferences. 25% of theseats are held by the radical left National Workers Party (NWP), a loose band of differenttrade and agricultural groups that advocate for collectivization. 20% of the seats are held bythe right-leaning National Reconstruction Party (NRP) whose voters are drawn from thenations middle classes, which are conservative both economically and socially but generallypro-democracy. 15% are held by a right-leaning extremist party, the National Order Party(NOP), that represents the nations landowners, manufacturers, and business owners thatdid not support democratization but supported and end to the military regime due to itsmismanagement of the economy.Instructions:Faced with the challenge of stabilizing the economy and ensuring support, the newgovernment needs to consider the best portfolio of domestic and international economicpolicy choices. The government would like you to alert them to their main risks, the mainpolicies for addressing them, and the main rewards for doing so. Please do so in thefollowing order:a. Introduce the main risks to its survival (about 350 words)b. The best fiscal and monetary policy strategy (about 350 words)c. The best strategy for redistribution across socio-economic groups (about 350 words)d. The best strategy for redistribution across regions (about 350 words)e. The best incoming foreign direct investment strategy (about 350 words)f. The best trade policy strategy (about 350 words)g. The best currency policy strategy (about 350 words)h. Outline the main rewards that can be expected from these policies (about 350words)*use attached readings*
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