Final assignment

Final writing assignment

Submit the final writing assignment to the appropriate Submission box.

Note that there are two pages for this assignment.

Academic Integrity and Use of sources:

• You are expected to work on this assignment by yourself. It should show your work and your understanding.
• Note that you are expected to demonstrate what you know of class material, so make sure you don’t copy off of other sources. Writing down what you find on the internet instead of using class material can lead to a lower score.
• Write in your own words, and draw your own graphs. There should be no “copy and paste.”

Formatting:

• Please, type your answers.
• Graphs: Draw graphs directly on your computer into your document or draw by hand, then scan or take a picture and upload the picture into your document.
• Make your answers brief. Two to three sentences should be sufficient for most explanations.
• You don’t need to insert the assignment questions in your document, but make sure you keep the numbering below in your answers, so I know which question you are answering.

ASSIGNMENT TEXT:

For questions 1 – 4 below, think of an economy that is NOT in a pandemic situation.

1. Draw the AD, SRAS and LRAS curves for an economy that currently has a recessionary gap.Make sure you label the axis and each curve. Show the current level of output as Y1 and the current price level as P1.
2. Give TWO events that could have gotten the economy into the recessionary gapassuming that the economy started at full employment. Explain whether each event would have shifted demand and/or supply curves to create the gap and explain the intuition behind the shift. (i.e. what exactly is going on that makes the curve(s) shift in each case?)
3. Explain brieflytwo ways of using fiscal policy to close the gap and how each of them will affect the economy. Show how your suggested fiscal policy will affect the demand and/or supply curve(s) in your graph above. Mark the equilibrium after fiscal policy as Y2, P2.
4. Go back to the economy with a recessionary gap in question 1. You now want to look at how monetary policy could have been used instead of fiscal policy to close the gap.
   1. Draw the money demand and supply curves. Make sure you label the axis and each curve.
   2. Illustrate in your graph what the Fed would have done to money demand and/or supply in this case to try to close the recessionary gap.
   3. Explain briefly how this change in money demand and/or supply would affect the economy and potentially close the recessionary gap. (No need to illustrate in AD-AS diagram)