Economic Conditions (the setting for your analysis): Assume that over the course of a year, the US economy experiences an unemployment rate that rises from 4% to 8%, a real GDP growth rate of negative 4%, and an inflation rate of negative 2%.

You will use these economic conditions in relation to the goal of achieving a healthy sustainable GDP growth rate as the context for the following analysis.

Answer the following questions in order given. Supply graphs where required. 4 graphs required.

1. Assuming that at an initial point in time (T#1) the national economy is in full employment equilibrium at $20 trillion and the CPI at 300, draw an AD, SRAS, and LRAS curve illustrating this situation. (10 points - Graph 1--show GDP and Price Level (CPI))
   
2. Now at a second, later point in time (T#2) indicate the new short run equilibrium after the economy experiences a rise in unemployment from 4 to 8%, the real GDP growth rate since the first point in time (T#1) has been negative 4%, and inflation has been negative 2% since time period #1. (HINT: redraw the graph you used to answer Question #1 and show on this redrawn graph a shift in the curve (AD, SRAS, or LRAS) that likely caused these changes. Explain why you chose to shift the curve you shifted. (15 points -- Graph 2--show GDP and Price Levels (CPI))
   
3. Explain what the above data and graph from Question 2 (Q#2) reveal about economic conditions in the country. (10 points)
   
4. Now redraw the graph you used in answer to Question #2, and show what classical, pre-Keynesian economists would expect to happen in the long run - in a later time period-#3 (T#3A)-if the national government did not intervene in the economy (i.e., no fiscal or monetary policy is used to address the problems outlined in Q#2). (15 points-Graph 3--show GDP and Price Levels (CPI))
   
5. Now, assuming the role of a Keynesian (intervensionist) economist, explain how discretionary fiscal policy could be used to intervene in the situation outlined in Question #2 to correct and improve the situation. (10 points)
   
6. Redrawing the graph (Graph 2) you used to answer Question #2 (this will be the fourth graph required for this assignment) show what you predict will be the end result of the policies you advocated in Queston 5 at a third point in time (T#3B-this would be the same period of time as in Question 4 but after intervention, not after no intervention). (10 points - Graph 4--show all GDP and Price Levels (CPI))
   
7. Now, assuming the role of a thoroughly modern Keynesian economist who agrees that monetary policy is an important tool for correcting economic problems, explain what the Federal Reserve would have to do to achieve the same results Keynesian economists hoped to achieve with fiscal policy. What tools would the Federal Reserve likely use to achieve these goals? (10 points-no graph required)
   
8. Drawing from you have learned from this course, thoroughly explain at least 2 arguments that could be made in opposition to the fiscal policy response you advocated in your answer to Question 5 and one argument that could be made in opposition to the monetary policy response you advocated in your answer to Question 7. (10 points)
   
9. Considering your answers to Questions 4, 5, 6, 7, and 8, would you support the use of interventionist policies in this situation? Thoroughly explain why or why not. (10 points)

EXTRA CREDIT FOR DAC ASSIGNMENT- 10 points (10% of DAC grade) (5th graph required)
As in Question 1, assume that at an initial point in time the national economy is in full employment equilibrium at $20 trillion and the CPI at 300, draw an AD, SRAS, and LRAS curve illustrating this situation. Using the information in the "background knowledge" introductory paragraph, add to the graph you have drawn the new full employment equilibrium by showing the shifts in the AD, SRAS, and LRAS curves assuming the economy grew normally from Time Period 1 to Time Period 2. In other words, draw a graph showing the full employment equilibrium in Time Period 1 and then in Time Period 2 using AD, SRAS, and LRAS assuming that the economy did not encounter the problems specified in Question 2 above. (The extra credit here is different and distinct from the extra credit mentioned immediately below. This extra credit will add to your grade on this DAC assignment. The extra credit referred to immediately below replaces the extra credit students would have earned if they were still required to take Exam 3 and Exam 4, and they took them on or before their extra credit deadlines.)

For the grading policy on the four routes to completing this course, please refer to the "Grading" section of the course syllabus.

The extra credit deadline for submitting the mandatory DAC assignment for students following the Traditional Route or the Competency Based Route is Tuesday, April 23, by the end of the day.

If students who have completed everything in these first two routes but have not completed the required DAC assignment, they will receive a 0% for the 30% of the course grade it represents.

The deadline for submitting the mandatory DAC assignment for students following the Whole Course Competency Route or the Fail-Safe Route is Tuesday, May 7, by the end of the day. Because of the nature of these routes there is no extra credit attached. The deadline is different than the deadline for students following the Traditional Route or the Competency Based Route because the DAC assignment is not a prerequisite for taking the Final Exam for Whole Course Competency Route or the Fail-Safe Route (since students taking these routes have either already taken the equivalent of the Final or do not have to take it), and hence it does not need to be graded before Thursday, May 9.

If students who passed the Course Challenge Exam do not submit an assignment, they will receive a grade based on the 30% weight of the DAC being worth 0%.
If students who completed all the MyEconLab assignments but have no point totals from the exams or low point totals from the exams, they will receive grades based on their point totals.

For the grading policy on the four routes to completing this course, please refer to the "Grading" section of the course syllabus.