1. (b) Suppose two countries compete in international brand markets. The two governments are reflecting on whether or not it is advisable to adopt a free trade policy. The entries in the table below show (in millions of pounds) the earnings from each policy. Finding the Nash equilibrium. Analyze how you conclude your answer. Free trade policy 60.60 20.70 Imposition of restrictions 70.20 30.30 Nash equilibrium refers to the strategy that would benefit both sides at the same time. In the previous question, Country A's profits are on the right side while Country B's profits are on the left side. In the previous case, if Country B assumes:1. Country A adopts a free trade policy or imposes restrictions in both cases. Country B will choose TAX RESTRICTIONS because the gain in adopting this strategy is greater. So this is the dominant strategy for the company. In the previous case, if Country A assumes:1. Country B adopts free trade policy or imposes restrictions in both cases. Country A will choose IMPOSING RESTRICTIONS because the gain in adopting this strategy is greater. So this is the dominant strategy for the company. In this case if we get 30, 30 as Nash equilibrium since following this strategy both countries are in profit. (c) Change your answer when the earnings table is changed as: Free Trade Policy 60.60 70.80Impressive RestrictionsIn the above case if Country B assumes:1. Country A adopts a free trade policy or imposes restrictions in both cases. Country B will choose TAX RESTRICTIONS because the gain in adopting this strategy is greater. So this is the dominant strategy for the company. In the above case, if Country A borrows... paper... currency and to maintain the exchange rate the government needs to sell off the foreign reserves of the Bank. Therefore monetary policies are ineffective with fixed exchange rates.21Y1Y2Paula, H(1973) On Measurement of Monetary policy and Concepts, McGraw Hill, LondonPress, London, 88-121Carlton, Jacob, G (1890) Keynesian Theory Of Unemployment, Journal of Business Ron , Walt. V (2001) The Theories of Fixed Exchange Rate, Business Economicspapers, vol11, 345-67 Nelly, Jackson & Von. G (1994) Game theory and its concepts in an economy, Moira, Ben. C(1920) Monetarism and its policies, Advanced Macroeconomics, 213-Warren, Ven. S(2004) Nash Equilibrium and its concepts used in an Economy, Journal of Business Economics, 7, 345-67Samuel, Andy(1993) Free International Trade being widely used, Business EconomicPapers, vol14, 421-56