trident eco202 module 3, 4, and 5 cases

module 3 case study

Macro-economic choices, particularly in the areas of fiscal policy, are not just about economics but about political philosophies, values and goals. This Case asks you to think about some of these dimensions.

1. Do all government purchases have the same effect on aggregate demand? Defend your answer with economic reasoning.

2. Suppose a country increases government purchases by $100 billion. Suppose the multiplier is 1.5 and the economy’s real GDP is $5,000 billion.

a. In which direction will the aggregate demand curve shift and by how much?

b. Why is the change in real GDP is likely to be smaller than the shift in the aggregate demand curve?

3. Read the Case in Point: Crowding Out in Canada in Section 12.3 (click here) and answer the following:

a. What is “crowding out,” and how does it reduce private investment?

b. Given that only certain types of government expenditures crowded out private investment, what are the implications for fiscal policy choices?

Case assignment expectations:

Use information from the modular background readings as well as any good quality resource you can find. Make sure you cite all resources you use and provide a reference list at the end of your paper.

LENGTH: 4 typed and double-spaced pages.

In addition to the overall quality, depth, grammar, and organization of the paper, the following will, in particular, be assessed:

1. Analytical skills that allow you to draw conclusions, questions 3,4 and 5 on federal budget projections.

2. Critical thinking skills, question 5, on formulating policy about budgetary matters.

module 4 case study

Money supply and interest rates are important to individuals and businesses making decisions to finance purchases. The following articles assess conditions for financing purchases and important aspects of monetary policy. Read both and respond to the four questions in a 4 to 5 page report.

1. The Federal Reserve policy makers use several different tools to influence the money supply and interest rates. Identify and briefly describe these tools. Include in your answer the difference between expansionary and contractionary monetary policies.

2. Define and explain the three lags discussed in monetary policy. For each type identify a problem caused by the lag.

3. If the economy is operating below its potential output, what kind of gap exists? What kinds of fiscal or monetary policies might you use to close this gap? Can you think of any objection to the use of such policies? (using information from module 3 as well).

Case assignment expectations:

Use information from the modular background readings as well as any good quality resource you can find. Make sure you cite all resources you use and provide a reference list at the end of your paper.

LENGTH: 4-5 typed and double-spaced pages.

In addition to the overall quality, depth, grammar, and organization of the paper, the following will, in particular, be assessed:

1. The level understanding of the link between Federal Reserve actions and its affect on interest rates and monetary policy

2. Your ability to understand the link between current and prospective economic conditions and making decisions about major long-term financial commitments.

module 5case study

The Two Branches of Macro-Economic Theory

Thinking like a Mac ro-Economist:

John Maynard Keynes and Milton Friedman

Macro-economics is perhaps the most divisive area of economics when applied to political decision making, and macro-economists divide themselves into different schools of thought. Two of the biggest camps are the Keynesians and the Monetarists. Keynesians and post-Keynesians follow the theories of John Maynard Keynes, the most-celebrated economist of the 20^th century who proposed that government stabilize the economy with the use of fiscal policy. Monetarists, on the other hand, follow the teachings of Friedrich Hayek. For this assignment do some research on the ideas of Keynes and Hayek. Focus on the "big picture" of what their main ideas are and how they have influenced policy makers. Then write a 4 to 5 page paper addressing the following questions:

1. a. Discuss the policies that Keynes and Hayek advocated regarding how the federal government should manage the economy. What are the major differences between each school of thought.

b. Based on your answer to question #1a, which of the two economists would you agree with more? Explain.

2. Read Case in Point 3: Steering on a Difficult Course in section 17.3 of the online text (link here).

a. Why did people believe the difficulties Asian economies were experiencing in 1997–1998 might bring a recessionary gap to the United States?

b. In dealing with the recession of 2008 why is it important for the Fed and Congress to coordinate monetary and fiscal policy measures?

3. Compare the rationale of the Reagan administration for the 1981 tax reductions with the rationale behind the Kennedy–Johnson tax cut of 1964, the Bush tax cut of 2001, and the Bush tax cut of 2003.

Case Assignment Expectations:

LENGTH: 4-5 typed and double-spaced pages.

In addition to the overall quality, depth, grammar, and organization of the paper, the following will, in particular, be assessed:

1. Use information from the modular background readings as well as any good quality resource you can find. Make sure you cite all resources you use and provide a reference list at the end of your paper.

2. Your ability to apply the concepts and knowledge learned in this course to formulate your own ideas about resolving economic difficulties.