Assignment 3

Macroeconomics (ECON 201)

Due Date:30th April 2022 @ 23:59

For Instructor’s Use only

General Instructions – PLEASE READ THEM CAREFULLY

· The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.

· Assignments submitted through email will not be accepted.

· Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.

· Students must mention question number clearly in their answer.

· Late submission will NOT be accepted.

· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

· All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

· Submissions without this cover page will NOT be accepted.

Chapter 17 & 20: Case Study: Money Growth and Inflation and Aggregate Demand and Aggregate Supply: (10 Points)

In the third assignment for the Macroeconomics course, the students are required to discuss how changes in the quantity of money affect the economy and the aggregate demand and the aggregate supply explains the economic fluctuations. Answer the questions given, upon successful completion of the assignment; the student should be able to achieve the following learning outcomes:

Learning Outcomes:

1. Describe how to evaluate macroeconomic conditions such as unemployment, inflation, and growth. [CLO 1.2]

2. Recognize the fundamental determinant’s of a nation’s long-run economic growth. [CLO 1.3]

Reference Source:

Textbook: – “Mankiw, N. Gregory. Principles of Macroeconomics, 6th ed. Mason, OH: South-Western Cengage Learning, 2011. ISBN: 9780538453066 (hard copy); ISBN: 9781115468523 (eBook)”

Case Study:1 (5 Points)

Please read the case “Money and Prices during Four Hyperinflations” from Chapter 17 “Money Growth and Inflation” Page: – 652 – Chapter 30 given in your textbook – “Principles of Macroeconomics”. The case study presented in the chapter discussed the government can pay for some of its spending simply by printing money. When countries rely heavily on this “inflation tax,” the result is hyperinflation. and Answer the following Questions:

Questions:

1.1. Suppose a country’s inflation rate increases sharply. What happens to the inflation tax on the holders of the money? Why is wealth that is held in savings accounts not subject to a change in the inflation tax? Can you think of any way holders of savings accounts are hurt by the increase in the inflation rate? (2.5 points)

1.2. It is sometimes suggested that the Federal Reserve should try to achieve zero inflation. If we assume that velocity is constant, does this zero-inflation goal require that the rate of money growth equal zero? If yes, explain why? If no, explain what the rate of money growth should equal? (2.5 points)

Important Note: – Support your submission with course material concepts, principles, and theories from the textbook and at least two scholarly, peer-reviewed journal articles.

Case Study:2 (5 Points)

Please read the case “Oil and the Economy” from Chapter 20 “Aggregate Demand and Aggregate Supply” Page: – 750 – Chapter 33 given in your textbook – “Principles of Macroeconomics”. A case study discusses the model of aggregate demand and aggregate supply explains the economic fluctuations.

Questions:

2.1. Explain the short-run and long-run impacts of oil price increase on output and price level in the U.S. during 1973-1975 periods using the model of aggregate demand and aggregate supply. (2.5 points)

2.2. Explain the short-run and long-run impacts of oil price fall on output and price level in the U.S. in 1986, using the model of aggregate demand and aggregate supply (2.5 points)

Important Note: – Support your submission with course material concepts, principles, and theories from the textbook and at least two scholarly, peer-reviewed journal articles.

Answer: