Assessment 2
- In Module 1 you were introduced to the idea of marginal analysis. In Module 2 you learned about the model of supply and demand in various markets (product, labor, financial). How do buyers make decisions “at the margin” when considering whether to trade money for what the seller is selling? How do sellers make decisions at the margin when considering whether to sell what they have for money? Make sure to recall how people make decisions at the margin, and consider connecting your answer to the concept of consumer surplus, producer surplus, and opportunity costs.
- Give a realistic and unique example of how equilibrium prices (p*) and equilibrium quantity (q*) are re-established after the puncturing of equilibrium (i.e., the demand and/or supply curve shift). Explain what would cause one or both of the curves to shift, if this would create a surplus or shortage, and the ensuing pressure this would have on prices and quantity purchased/sold to change as a result. Make sure to accurately discuss changes in quantity supplied or demanded vs. changes in supply or demand.
- Give a unique (realistic or fictional) example of the government interfering in a market to institute a price control (price ceiling or price floor). Explain the government’s goal with implementing the price control. Explain who is likely to benefit and who is likely to lose, including reference to deadweight loss. What suggestion would you make instead of a price control that will help meet the government’s goal with less negative impact (explain the economic impact this has in the market)?
- Answer the thematic question of the module: How are people’s lives impacted by markets? Using multiple economic concepts explored in this module, illustrate the various ways that markets impact people’s lives (including product, labor, and financial markets).
- Using recent data gathered through news sources or governmental websites, describe the United States’ economy as it currently stands (i.e., data that has been reported within the last year, preferably sooner). Make sure to give information that addresses all major areas of the module: GDP, GDP growth, labor productivity, unemployment, and the inflation rate. As you are reporting these numbers and citing your sources, make sure to explain what these statistics mean and how they are calculated.
- Given the statistical data you shared in your response to question one, answer the thematic question of the module: How well is the economy doing? Make sure to address both positive indicators and negative indicators as you see in the data. Give historical comparisons (from the textbook chapters or other sources) when appropriate that helps put these numbers into context. How might an “average” person in this economy be experiencing it?
- American writer and humorist Mark Twain was quoted as saying “There are three kinds of lies: lies, damned lies, and statistics”. Using some examples learned in this module, illustrate what Twain might have meant if he applied his saying to Macroeconomic statistics. In what ways can these statistics be misleading outside of context, or even counterintuitive? In what way may focusing on these statistics miss what we truly care about?
- Question 8 has two parts:
- Give an example (real or fictional) of a news event that would shift aggregate demand, ceteris paribus. In the interim between just before the event occurring to its final outcome (in the short run), describe what is happening to real GDP, the unemployment rate, and the inflation rate.
- Give an example (real or fictional) of a news event that would shift the aggregate supply curve in the short-run, ceteris paribus. In the interim between just before the event occured to its final outcome, describe what is happening to real GDP, the unemployment rate, and the inflation rate in the short-run.
- Assume the economy has entered a recessionary gap, such that the current real GDP produced is below the economy’s potential and that cyclical unemployment is positive. How will the economy recover back to its potential? Explain how your answer differs between the Keynesian perspective and the Neoclassical perspective. From each perspective, explain how active (if at all) the government should be in using policy tools to help the economy improve.
- Answer the thematic question of the module: How does the economy change over time? Use the tools of the AD/AS model to explain key relationships between real GDP, unemployment, and the price level (inflation rate) as discussed in this module. Does it matter if our timeframe for analysis is the short-run or the long-run? Explain.
