# Macroeconomics

Font: Arial. Size: 12,5pts. Line spacing: 1,5. Text align: Justified

1000 words

The in-text References and the Bibliography have to be in Harvard’s citation style

Category: Mathematics & Physics Subjects: Mathematics Deadline: 12 Hours Budget: \$120 - \$180 Pages: 2-3 Pages (Short Assignment)

## Attachment 1

BCO124 MACROECONOMICS Task brief & rubrics

Description:

• This is an individual task.

Submission: Via Moodle (Turnitin). Submissions will be accepted until Monday 3rd of May 2021 at 23:59 CEST.

Formalities:

• The minimum amount of words to be used is 1000 and the maximm is 1500

• You may want to include images/graphics etc. (for example from their website) to make your reasoning and argumention more visual and explicative

• Font: Arial. Size: 12,5pts. Line spacing: 1,5. Text align: Justified.

• Appendices and References, do not count towards the final wordcount but are strongly recommended (referencing websites, articles, books etc.)

• The in-text References and the Bibliography have to be in Harvard’s citation style.

Questions:

1. (25%) The economy is in recession. The government knows that shifting the AD curve rightward by \$200b would end the recession.

a. If MPC = .7 and there is no crowding out, how much should Congress increase G to end the recession? b. Explain what is the crowding out effect. Use graphs.

2. (25%) For each of the events below (A,B,C),

- determine the short-run effects on output

- determine how the Fed (or Central Bank) should adjust the money supply and interest rates to stabilize output

A. Congress tries to balance the budget by cutting govt spending.

B. A stock market boom increases household wealth.

C. War breaks out in the Middle East, causing oil prices to soar.

3. (25%) Suppose that the reserve requirement for checking deposits is 5 percent and that banks do not hold any excess reserves.

1. If the Fed sells \$2 million of government bonds, what is the effect on the economy’s reserves and money supply? 2. Now suppose that the Fed lowers the reserve requirement to 2.5 percent but that banks choose to hold another 5 percent of deposits as excess

reserves. Why might banks do so? What is the overall change in the money multiplier and the money supply as a result of these actions?

4. (25%) Suppose that this year’s money supply is \$150 billion, nominal GDP is \$8 billion, and real GDP is \$4 billion.

a. What is the price level? What is the velocity of money? b. Suppose that velocity is constant and the economy’s output of goods and services rises by 5 percent each year. What will happen to nominal

GDP and the price level next year if the Fed keeps the money supply constant? c. What money supply should the Fed set next year if it wants to keep the price level stable?

Outcomes: This task assesses the following learning outcomes:

• understand the forces determining macroeconomic variables such as national output, inflation, unemployment, and interest rates;

• apply macroeconomic terminology and assess macroeconomic policy suggestions;

• evaluate real life situations with a practical application of the acquired tools and knowledge.

Rubrics

Exceptional 90-100

Good 80-89

Fair 70-79

Marginal fail 60-69

Knowledge and Identification of the main Issues

35%

Identifies and demonstrates a sophisticated understanding of the main issues / problems in the case study

Identifies and demonstrates an accomplished understanding of most of the issues/problems.

Identifies and demonstrates acceptable understanding of some of the issues/problems in the case study

Does not identify or demonstrate an acceptable understanding of the issues/problems in the case study

Application 35%

Student applies fully relevant knowledge to the situation provided

Student applies mostly relevant knowledge to the situation provided

Student applies some relevant knowledge to the situation provided. Some minor misunderstandings may be evident.

Student applies little relevant knowledge to the situation provided. Misunderstandings are evident.

Evaluation 20%

Student assembles a coherent response to the question, providing a range of support and justification that leads to a well-reasoned conclusion

Student assembles a good response to the question, providing support and justification that lead to a well- reasoned conclusion

Student assembles a fair response to the question, providing some support and justification that lead to a well- reasoned conclusion. Minor misunderstandings may be evident

Student’s response to the question lacks coherence. Limited support and justification are provided that may or may not be well linked to the conclusion

Communication 10%

Student communicates ideas extremely clearly and concisely. Compliance with the guidelines on font, size, line spacing and text align will also be taken into account.

Student communicates ideas clearly and concisely. Compliance with the guidelines on font, size, line spacing and text align will also be taken into account.

Student communicates ideas fairly clearly and concisely. Compliance with the guidelines on font, size, line spacing and text align will also be taken into account.

Student attempts to communicate ideas clearly and concisely, with some problems. Student does not follow the guidelines on font, size, line spacing and text align.