Macroeconomic Analysis Paper II-Fall 2015

Macroeconomic Analysis Paper II-Fall 2015
Hard copy due in-class 12/09/2015!!!!!
Must also be submitted in D2L Dropbox

I. Select one of the options from the list below (and title your paper accordingly).

1. Aggregate Demand- Aggregate Supply and Fiscal Policy
• Briefly describe the AD-AS model. Then using the AD-AS framework, explain and illustrate the effect of two of the following events on the short run and the long run equilibrium quantity and price level of the economy. Will this create an inflationary or recessionary gap? What type of fiscal policy(ies) would you recommend to help move the economy back to potential output? Draw a graph (properly labelled) to help illustrate your answer. Be sure to provide the intuition behind what is happening as well as discuss how your recommended policy solution will work in this scenario.
a. A stock market boom increases the value of stocks held by households
b. Firms come to believe that a recession in the near future is likely
c. Anticipating the possibility of war, the government increases its purchases of military equipment.
d. The quantity of money in the economy declines and interest rates increase.

2. Aggregate Demand-Aggregate Supply and the Government Deficit
• What are some of the potential economic consequences of a growing/persistent budget deficit? How is this related to government debt?
• Some economists want to decrease government spending to reduce government budget deficits. Other economists want to reduce the size of the deficit by raising taxes. Compare these two points of view using aggregate supply and aggregate demand analysis. Illustrate the impacts of each program on the macroeconomy using a correctly labeled AD/AS graph. Does it make a difference if the economy is currently experiencing a recession at the time of the policy’s implementation? Explain.
• Summarize the economic consequences of a balanced budget rule for the federal government and your recommendation on whether or not it should be implemented.

3. Macroeconomic Policy and the Loanable Funds Market
• Assume the government is running a balanced budget when the economy enters a recession. First, define and describe fiscal and monetary policy and outline an expansionary policy response for each. Be sure to explain why your solution would be appropriate to use.
• Use a graph to demonstrate the impact of both fiscal and monetary policy responses on the loanable funds market. Be sure to properly label everything and provide the intuition behind what is happening. What are the potential economic consequences of each response that policy makers should consider when making their decision? Should policy makers be concerned about the crowding out effect in either case? Why/why not?

II. You will be graded based on your ability to demonstrate what you have learned this semester in regards to economic analysis and critical thinking
• You should assume that your reader is intelligent but not well versed in the theory of economics. Make sure to clearly define and explain terms and concepts (cite where appropriate). Many (but not all) of the terms are bolded below.
• Drawing a graph is not enough. You must fully analyze your graph (and what it illustrates) in your writing, using complete sentences.

III. How to succeed on your paper:
1. Demonstrate critical thinking and economic analysis with respect to each topic.
2. Go over what we have learned in class. Ask yourself:
a. Did I thoroughly explain the concept using economic logic from the course?
b. Did I clearly define all economic terms and explain their application?
c. Did I evaluate each economic concept correctly?
d. Am I making any unreasonable assumptions about what the reader should know?
e. Go to the Economics Help Center if you need help explaining/understanding the concepts!
3. A graphical analysis is required in all of these options. Ask yourself:
a. Did I label all parts of my graph?
b. Am I using terminology from the course?
c. Did I discuss why lines in the graph may shift and/or why my graph shows movement along a curve?
4. Does my paper reflect the quality of work that can be expected in a final draft?
a. Presentation and effort count towards your grade. I expect you to make sure that your paper reflects the effort required to earn the grade you desire. In other words, if you do not want to earn an A, these are types of things I would expect to see in your paper:
i. Large blank spaces between lines/paragraphs
ii. Your graph not displaying correctly
iii. Missing components
iv. Missing or duplicated words, punctuation mistakes, fragmented sentences… things that happen because you have failed to proofread, not because of “normal” spelling/grammar/punctuation errors.
v. Failure to follow directions
vi. Explicitly stating in your writing that you do not know what you are talking about.
5. Make sure your writing is polished, clear and concise.
a. Grammatical flow is often one of the biggest challenges I find in student papers. Students often have excellent ideas but fail to clearly articulate and communicate them to the reader. Vising the Writing Center in BP102 or using the Online Writing Center can dramatically help improve your grade!
IV. Formatting and additional requirements:
o Font: Times New Roman (Size 12)
o Spacing and margins: Double Spaced, 1 inch margins (top, bottom, left and right)
o Citation style: MLA- A bibliography on a separate page is required in addition to in-text citations!
? Make sure to properly cite your work, including the textbook and class lectures.
o Title and label all graphs and figures
o Include your name and course section number.
V. Submission Instructions (from course syllabus)
• Paper must be submitted via the D2L Dropbox and in hard copy in class. Failure to adhere to both requirements will result in a zero for that paper and/or be subject to the late penalty as described below. If you do not own a copy of Microsoft Word, either save your document in a Microsoft Word format before uploading it to D2L or, open the document at the campus computer lab and save it as a Microsoft Word document as all campus computers have the requisite software.
• Late papers will be accepted at a penalty of 20% off each day that the assignment is late – That is, you may not receive any credit if the assignment is turned in 5-days or more after the due date.
• When you submit your paper via D2L, you will receive an email confirmation in your D2L inbox. If you do not receive this confirmation email, then you have not successfully uploaded your paper and you will receive a zero and/or be subject to the late penalty as described above. Please make sure to activate your D2L email account.
i. If at any time you are having difficulty uploading your paper to the Dropbox on D2L, make sure to email your paper to me before the due date and time to avoid any late penalties. You will need to contact IT services to help you resolve the D2L upload issue ASAP. Please note that you must still upload your paper to the dropbox on D2L to earn any credit for the assignment.
• FRCC has an account with Every paper you submit to D2L will automatically be run through this software and a report will be provided to both the student and the instructor. To see this report ahead of time (so that you can make the necessary corrections) simply upload your paper to the dropbox on D2L, wait about 30 minutes, log back in to the Dropbox and click on the report icon (usually titled “similarity index”).