Principles of macroeconomics

Principles of macroeconomics

INSTRUCTIONS:

The Term Paper consists of 2 short essay problems of which you must answer. Answer Question 1, which is compulsory, and then Question 2. Utilize concepts, theories and principles from class to explain your assumptions. You can further support your answers with outside research. If you use sources from the Internet, a textbook or anything outside the class slides, you must provide citations in footnotes or endnotes.

Each essay should be about 700 words, single-spaced, font size not to exceed 12. Essays must be typed and printed. Handwritten essays will not be accepted. In addition to this, you may add diagrams, tables or other illustrations. It is very important that you use your own words in writing these essays. University guidelines on academic integrity will apply in cases where copy/paste from the Internet is observed (except for diagrams) or identical papers from students.  Use care in writing. Proofread your essays before finalizing. Carelessly written essays will incur penalties. Neat presentation and carefully drawn diagrams will get credit.

Use the Introduction/Body/Conclusion model for the papers. Introduce the idea and the background to the question in the Intro, state your assumptions, the alternatives and the analysis using graphs, tables or examples in the Body, and then formulate your Conclusion at the end. Remember: What might work for one setting, may not work for another. Ambiguity is OK. Just tell me why there is ambiguity, drawing from what you learned in class. Consider drawing real world examples from various settings and time periods to illustrate your arguments.

GRADING CRITERIA

Each essay is worth 25 points. 15 points is based on your use and application of macroeconomic principles; 10 points is based on writing quality, clarity of expression and creativity. I am looking for your ability to analyse economic situations using the instruction and experience you have received in class so far. Credit will be given for use of economics terminology and reference to the macroeconomic situations we have studied. Please note that I am not looking for a single right answer. Rather, you can describe several options or outcomes based on your analysis of the problem. Include real world examples to illustrate the theories. I will be looking for originality of thought and expression and how tightly you can bind your arguments to the material we have learned in class. The assumptions you make, supported by economic theory and principles, may lead you to suggest various alternatives. That is OK!

QUESTIONS

Question 1 (700 words) – COMPULSORY (Everyone has to do this)

It is John Maynard Keynes’s 136^th birthday. You have been asked by a leading economic journal to write a short article celebrating the legacy of this great man. Explain, giving real world examples why the principles and theories he advocated in 1936 are still relevant today for both developing and developed economies. Focus on how Keynesian theories were formed during the Great Depression (e.g. lack of aggregate demand creates unemployment) and used most recently to help countries get out of the Great Recession of 2008-11. Cite examples and state your assumptions. There is no right answer. I would like to see your understanding of Keynes’s theory and policy recommendations with observations from the world today. You can choose one or more country to illustrate your argument or draw from several examples.

Question 2 (700 words)

You are the governor of the Central Bank of Syldavia. You see a Phillips curve with high inflation but low unemployment. The President of Syldavia has asked you to devise a short-term policy to reduce inflation. Explain your approach in a memo to the President explaining the underlying assumptions using the tools at your disposal and macroeconomic principles from class. One thing: Interest rates are already high in Syldavia. Take this into consideration carefully when deciding on which tool to use. Devise a step-by-step approach with diagrams. You can include multiple options for the President to consider. Consider the factors that cause inflation, the tradeoffs you may have to make with unemployment, and the relationship of unemployment with aggregate demand. It is important not to just say you will do ‘this’ and ‘that’ will happen. Explain the reasons why these outcomes will happen, again sticking closely to macroeconomic principles. Once again, start with a Phillips curve and end with a Phillips curve, showing the policy by means of a diagram.

Grading Rubrics:

Q1: Content/Argument/Flow 60%, Research 20%, Diagrams/Presentation/Style 20%

Q2 or Q3: Content/Flow 70%, Diagrams/Presentation/Style 30%