Assume these data points about a
hypothetical state of the U.S. economy:
1) Inflation in the last quarter was at
an annual rate of 1.5%, down from rates of 3-4% in previous reporting periods,
2) Unemployment, which had been at 5.1% in the last two quarters, increased
this quarter to 5.9%,
3) The federal funds rate remained at 4.5%, unchanged in
the last three meetings of the FOMC,
4) The business press reported that many
commercial banks say they are "fully loaned up" now,
prices were flat in the last quarter and inventory levels rose slightly,
Consumer confidence in the latest survey was unchanged from the previous
quarter but down from six months ago.
Given these data points what
macroeconomic policy tools, monetary or fiscal, would you apply? Why
would they work, or not? What historical precedents are there for using
the tools you recommend? Would you change your recommendations if most of
the nations of Europe were in recession?
Prepare your paper as described in the
syllabus addendum. Be prepared to discuss your ideas in an "open
forum" during class. Submit the paper to the portal and also submit a hard
copy in class on the due date.
Paper: This paper will require the
student to examine in greater depth the application of the course’s main ideas
to a real world situation. See the
assignment list for details. The paper
will consist of 10-12 pages of written material in the college’s prescribed
format, plus any supporting data or charts. Students will include appropriate citations
and references. Relevant data must be
researched, collected, and communicated in table or chart format, as
appropriate. This paper is due one week
before the final exam. Students must be
prepared to defend the paper’s main ideas orally in class.