Final answer:
In response to the double shock from oil price collapse and coronavirus, Angola can utilize fiscal, monetary, and trade policies for adjustment, including increasing government spending, reducing interest rates, and forging new trade agreements. The Phillips Curve illustrates the relation between inflation and unemployment affected by monetary policy. Fixed prices are mostly a short-term assumption due to price stickiness.
Step-by-step explanation:
For Angola, facing challenges due to the double shock of oil price collapse and the coronavirus pandemic, several adjustment policies can be recommended. Fiscal policies could include increasing government spending on infrastructure to stimulate the economy and/or raising taxes to improve government revenue. Monetary policies may involve reducing interest rates to encourage borrowing and investment, and trade policies could include negotiating trade agreements to boost exports.
Regarding the graphical illustration of the effects of monetary expansion when capital is mobile and both prices and exchange rates are flexible, the assumption of fixed prices is usually valid over the short term since prices are sticky in the short run. Over time, as prices become more flexible, the initial effects of monetary expansion may be adjusted as exchange rates move and the international balance adjusts.
The Phillips Curve illustrates the short-run trade-off between inflation and unemployment. When expansionary monetary policy is implemented, inflation tends to rise while unemployment falls, and vice versa for contractionary monetary policy. These movements are due to changes in aggregate demand and the availability of money within the economy.