Economics Homework Help

The US economy experienced a recession and a financial crisis at the end of the last decade. In the previous project we looked at causes originating in the real economy as described by components of the aggregate demand. In this project you are asked to critically asses the events taking place in the financial markets and the monetary and fiscal policies instituted in the wake of the crisis. To guide your thinking, you might consider the following questions: What were the main causes of the financial crisis of 2008? What is the role of monetary and fiscal policies? ? How about after the onset of the crisis? Was the response of the FED to the crisis effective? Was the fiscal stimulus effective? Did monetary and/or fiscal policies improve economic conditions? With the benefit of hindsight, did these policies have unintended consequences?

Instructions

• Post a slideshow with at least 5 and at most 8 slides that presents your analysis.
• Base your analysis explicitly on the material in chapters 11 and 12 of the textbook. Use the AS-AD model to explain how the sudden decline in investment and consumption (hint: this is equivalent to a decline in demand) which we have studied in the previous project on the 2008 recession, affected output and prices (which curve shifts, AS or AD?) . Next, explain using the AS-AD model which monetary policy and fiscal policies were implemented in the wake of the 2008 events and how did they work (which curve shifts and what were the effects on output and prices? How about the interest rate unemployment and investment?).
• There are also a set of lectures by FED’s Chairman Ben Bernanke (see below) that describe well the 2008 events and the role of monetary policy. Please note that the transcripts and the PPTs of the lectures are available in case you do not have the time to watch the videos.
• Please note that the responses included both monetary and fiscal measures!
• Include at least one data chart – i.e. from FRED (various macroeconomic data), BEA (various macroeconomic data), FED (data on interest rates), BLS (data on unemployment and prices), CBO (data on federal budget) (Links to an external site.), or another source of official data – that you have created in a spreadsheet program. The charts can show changes in the interest rate, in output, unemployment, the budget deficit etc.
• Pay attention to the structure and clarity of your argument; pay attention to grammar and style!
• Carefully format the slideshow, and save it as a PDF – file upload is restricted to PDF files. (With standard slideshow programs such as Powerpoint you can “save as” PDF.)

Motivation

Imagine that you work in a research institute, think tank or consulting firm that has been asked to produce a report on the above question, that you are the lead economist to write the report, and that you will have to report your findings (summarized in the slideshow) to the general public in a news conference. Further, to mimic the ensuing “public debate,” every report will be peer-reviewed (discussed online by fellow classmates) during the week after the due date. These “peer reviews” provide critical feedback for your own work. See this thread for further information on the process! The peer reviews are graded on participation.

Background reading

• On monetary policy and the crisis — Case, Fair and Oster, Principles of Macroeconomics chapters 10, 11 and 12 and the section on “Financial Crises and the 2008 Bailout” from chapter 14”
• The College Lecture Series by FED’s Chairman, Ben Bernanke.
• The Great Recession (Links to an external site.)
• Three Lessons for Monetary Policy (Links to an external site.)
• Fiscal and Monetary Policy in Time of Crisis (Links to an external site.)

Skill development

• Critical thinking Skills — You deepen your understanding of the material, and based on that critically assess, summarize and apply it. You learn to argue within the framework of an economic model.
• Computer Skills — You learn to produce a “professional” report that includes graphics that you have produced. You practice to download data series and create a chart and learn to integrate these in the slideshow.