ECON312N Week 7 Assignment Latest 2019 September
ECON312N
Principles of Economics
Week 7 Assignment
Required Resources
Read/review the
following resources for this activity:
Textbook: Review all
chapters (Weeks 1-7)
Lesson: Week 1-7
Minimum of 4 scholarly
sources
Introduction
There are several
problems that every economy must contend with. The culmination of these
problems is often a recession or an inflation, each of which requires an
extensive policy prescription. A recession is technically defined as two
consecutive periods of negative growth in real GDP. The National Bureau of
Economic Research (NBER) which dates U.S. recessions defines recession as “a
significant decline in economic spread across the economy, lasting more than a
few months, normally in real GDP, real income, employment, industrial
production and wholesale-retail sales.” (NBER, 2008, para. 2). Inflation is
measured by the Bureau of Labor Statistics (BLS) as an increase in the overall
price in the economy. The inflation rate is the percentage change in the prices
of goods and services from one period to the other. To measure the percentage
change in the general level of prices, economists use the GDP deflator method
or the Consumer Price Index (CPI) method. It is important to note that as the
general level of prices rise, the purchasing power – or value – of money
diminishes, and as the general level of prices decline, the value or purchasing
power of money rises.
When an economy is
going through recessionary or inflationary periods, two key policy
prescriptions are used to deal with either problem are Fiscal Policy and
Monetary Policy. Fiscal Policy is often initiated by the executive branch of
government and approved by the legislative branch of government. The main tools
of Fiscal Policy are Taxes and Government Spending. Monetary Policy, on the
other hand, is conducted by the Federal Reserve Board. The main tools of
Monetary Policy are Required Reserve Ratio, Discount Rate, and Open Market
Operation.
A recessionary gap
(see Figure 1) occurs when the full employment equilibrium in an economy falls
short of potential GDP.
Below full employment
macroeconomic equilibrium graph with price level on y-axis and real GDP on
x-axis
Figure 1: Below Full
Employment Macroeconomic Equilibrium. Reprinted from Bade &Parkin (2018, p.
545).
Activity Instructions
For this assignment,
complete the following:
If you were an
economic advisor to both the President and the Chair of the Federal Reserve
Board, what Fiscal Policy and Monetary Policy recommendations would you make to
deal with a recession?
In the literature on
Health Economics, there is a significant amount of research on the impact of
the Great Recession (2008-2009) on the nursing profession. If you were the
Health Policy Advisor to the President, what specific recommendations would you
make to the President to minimize the effects of recessions on the nursing
profession?
In the implementation
of Fiscal and Monetary Policies, discuss the limitations of these policies and
explain how the limitations are likely to affect the effectiveness of your
recommendations.
Note: In making the
recommendations, provide clear and concise channels of transmission of the
policy from its implementation to its effect on Aggregate Demand or Aggregate
Supply. Providing channels of transmission shows the ripple effect of an event
on one or more variables in the process of achieving an ultimate Macroeconomic
objective.
Example
Sample Question: What
is the effect of an increase in U.S. Exports?
Sample Answer: An
increase in U.S exports will increase Business Investments (I) and Household
Consumption (C). The increases in consumer spending and Business Investments
will increase Aggregate Demand (AD) which will shift the AD curve to the right.
The rightward shift in the AD curve, assuming the Aggregate Supply curve does
not shift, will cause an increase in the general level of prices and an
increase in real GDP.
Before you answer the
question, identify the four phases of the Business Cycle and indicate which of
the phase is associated with a recession.
Writing Requirements
(APA format)
Length: 3-5 pages (not
including title page or references page)
1-inch margins
Double spaced
12-point Times New
Roman font
Title page
References page
(minimum of 4 scholarly sources)
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