## 1. **Policy Formulation and Regulatory Framework**

Question

- **Stable Macroeconomic Policies:** Governments must maintain stable macroeconomic conditions, including manageable inflation rates, balanced budgets, and sustainable debt levels. This stability is essential for fostering investor confidence.
Provide an example with reference for the above text.

Answer 1

An example of stable macroeconomic policies fostering investor confidence can be observed in Germany's economic performance in the years following the 2008 financial crisis. The German government implemented a series of measures aimed at maintaining economic stability, including prudent fiscal policies that resulted in budget surpluses and a commitment to keeping debt levels within acceptable limits.

According to the International Monetary Fund (IMF), Germany's adherence to balanced budgets through its "debt brake" constitutional amendment helped to mitigate the impacts of the crisis and demonstrate fiscal responsibility (IMF, 2019). This commitment to macroeconomic stability reinforced investor confidence, leading to a swift recovery and strong economic performance compared to other European nations.

Reference:
International Monetary Fund. (2019). Germany's Economic Recovery: Lessons from the Past and Future Challenges. [Link to IMF publications]