Case Study Paper ECON 201 As a sample workforce activity, assume your employer h

ID: 1219112 • Letter: C

Question

Case Study Paper ECON 201

As a sample workforce activity, assume your employer has asked you to develop an economic analysis and a set of policy recommendations. To complete this activity, select a news article dated within the previous two months.

Clearly summarize the issue presented in the article and present two policy recommendations based on this issue.

Analyze the issue using the economic concepts and theory learned in our class.

Use additional references to back up your arguments.

Include at least one graph developed in the course. Charts and tables are also encouraged.

Possible concepts include:

GDP

Unemployment

Inflation and Price Indexes

Economic growth

Multiplier effect

Fiscal policy

Monetary policy

Your paper should:

be a total of 800 to 1200 words,

include a bibliography with at least three references, presented in APA style,

have been spell-checked and grammar-checked using Word’s review utility.

Grading Rubric for Case Study Paper

Completeness (10% of the paper grade)

Incomplete in most respects, the paper is unworthy of credit

Incomplete in most respects; does not reflect requirements

Incomplete in many respects; reflects few requirements

Complete in most respects; reflects most requirements

Complete in all respects; reflects all requirements

Understanding (20% of the paper grade)

Demonstrates an inadequate understanding of the topic(s) and issue(s), is unworthy of credit

Demonstrates an inadequate understanding of the topic(s) and issue(s)

Demonstrates an acceptable understanding of the topic(s) and issue(s)

Demonstrates an accomplished understanding of the topic(s) and issue(s)

Demonstrates a sophisticated understanding of the topic(s) and issue(s)

Analysis, evaluation, and recommendations (40% of the paper grade)

The analysis, evaluation, and recommendations of the issues are unworthy of credit

Presents an incomplete analysis of the issues identified. Makes little or no connection between the issues identified and the strategic concepts studied in the reading. Supports diagnosis and opinions with few reasons and little evidence; argument is one-sided and not objective. Presents realistic or appropriate recommendations with little, if any, support from the information presented and concepts from the reading

Presents a superficial analysis of some of the issues identified; omits necessary financial calculations. Makes appropriate but somewhat vague connections between the issues and concepts studied in the reading; demonstrates limited command of the strategic concepts and analytical tools studied. Supports diagnosis and opinions with limited reasons and evidence; presents a somewhat one-sided argument. Presents realistic or appropriate recommendations supported by the information presented and concepts from the reading

Presents a thorough analysis of most issues identified; includes most necessary financial calculations. Makes appropriate connections between the issues identified and the strategic concepts studied in the reading; demonstrates good command of the strategic concepts and analytical tools studied. Supports diagnosis and opinions with reasons and evidence; presents a fairly balanced view; interpretation is both reasonable and objective. Presents specific, realistic, and appropriate recommendations supported by the information presented and concepts from the reading.

Presents an insightful and thorough analysis of all issues identified; includes all necessary financial calculations. Makes appropriate and powerful connections between the issues identified and the strategic concepts studied in the reading; demonstrates complete command of the strategic concepts and analytical tools studied. Supports diagnosis and opinions with strong arguments and evidence; presents a balanced and critical view; interpretation is both reasonable and objective. Presents detailed, realistic, and appropriate recommendations clearly supported by the information presented and concepts from the reading

Research (10% of the paper grade)

The project does not contain any research, that is unworthy of credit

Supplements case study, if at all, with incomplete research and documentation

Supplements case study with limited research into the present situation of the company; provides limited documentation of sources consulted

Supplements case study with relevant research into the present situation of the company; documents all sources of information

Supplements case study with relevant and extensive research into the present situation of the company; clearly and thoroughly documents all sources of information

Writing mechanics (10% of the paper grade)

Writing is unfocused, rambling, or contains serious errors; does not comtain detail and relevant data and information; poorly organized, that is unworthy of credit

Writing is unfocused, rambling, or contains serious errors; lacks detail and relevant data and information; poorly organized

Writing lacks clarity or conciseness and contains numerous errors; gives insufficient detail and relevant data and information; lacks organization

Writing is accomplished in terms of clarity and conciseness and contains only a few errors; includes sufficient details and relevant data and information; well-organized

Writing demonstrates a sophisticated clarity, conciseness, and correctness; includes thorough details and relevant data and information; extremely well-organized

APA guidelines (10% of the paper grade)

Does not use APA guidelines

Reflects poor knowledge of APA guidelines

Reflects incomplete knowledge of APA guidelines

Uses APA guidelines with minor violations to cite sources

Uses APA guidelines accurately and consistently to cite sources

Completeness (10% of the paper grade)

Incomplete in most respects, the paper is unworthy of credit

Incomplete in most respects; does not reflect requirements

Incomplete in many respects; reflects few requirements

Complete in most respects; reflects most requirements

Complete in all respects; reflects all requirements

Understanding (20% of the paper grade)

Demonstrates an inadequate understanding of the topic(s) and issue(s), is unworthy of credit

Demonstrates an inadequate understanding of the topic(s) and issue(s)

Demonstrates an acceptable understanding of the topic(s) and issue(s)

Demonstrates an accomplished understanding of the topic(s) and issue(s)

Demonstrates a sophisticated understanding of the topic(s) and issue(s)

Analysis, evaluation, and recommendations (40% of the paper grade)

The analysis, evaluation, and recommendations of the issues are unworthy of credit

Research (10% of the paper grade)

The project does not contain any research, that is unworthy of credit

Supplements case study, if at all, with incomplete research and documentation

Supplements case study with limited research into the present situation of the company; provides limited documentation of sources consulted

Supplements case study with relevant research into the present situation of the company; documents all sources of information

Supplements case study with relevant and extensive research into the present situation of the company; clearly and thoroughly documents all sources of information

Writing mechanics (10% of the paper grade)

Writing is unfocused, rambling, or contains serious errors; does not comtain detail and relevant data and information; poorly organized, that is unworthy of credit

Writing is unfocused, rambling, or contains serious errors; lacks detail and relevant data and information; poorly organized

Writing lacks clarity or conciseness and contains numerous errors; gives insufficient detail and relevant data and information; lacks organization

Writing is accomplished in terms of clarity and conciseness and contains only a few errors; includes sufficient details and relevant data and information; well-organized

Writing demonstrates a sophisticated clarity, conciseness, and correctness; includes thorough details and relevant data and information; extremely well-organized

APA guidelines (10% of the paper grade)

Does not use APA guidelines

Reflects poor knowledge of APA guidelines

Reflects incomplete knowledge of APA guidelines

Uses APA guidelines with minor violations to cite sources

Uses APA guidelines accurately and consistently to cite sources

Explanation / Answer

The case study is based on the article taken from the website of foreignaffairs. It is titled - The Fed and the Great Recession - How Better Monetary Policy Can Avert the Next Crisis, Written by scott summer. The study takes excerpts from the article and is not based entirely on it.

Introduction

The recession of 2008-09 was shock to the economy that resulted from sub-prime crises. Global economy experienced a prolonged recession in the period 2008-09 that started to crawl in the US economy. Rising housing prices in 2006-07 was clearly an indicator of a housing bubble and not a consequence of restrictions imposed by local governments. The Sub-prime crisis acted in a similar manner and when bank panics occurred in the US, consumers became uncertain about the prosperity of the market economy.

Root cause

A bubble is the state of a market where the current price is far above its face value as determined by the fundamentals. Just as the bubble makes the stock price rise substantially, it can bring the prices down heavily causing a vicious cycle of downfall. Whenever a bubble bursts with the fall in the prices of stocks, it indicates that they will be worth less next year. In an anticipation of losing money, investors start selling their stocks and this bring the prices of stocks further down. This the vicious circle that spirals the value of stocks down happening swiftly.

This is what people believe what had happened in the US in 2008-09. The article states that it was not the burst of bubble but a failure of monetary policy to stimulate the economy. Though it has been justified by the many scholars that The federal government bailed out AIG because the financial market was already tottering and it could not take the risk of hurting it furthermore yet the federal government bailout was rebuked by many financial market experts, economists and politicians who were alleging it for not helping Lehman Brothers, an investment bank that was near bankruptcy. The Fed and the Treasury allowed it to go bankrupt.

Failure of monetary and fiscal policy

Starting from September 2007, the federal funds target was brought down from 5.25% to a the zero lower bound range of 0% to 0.25% in December 2008. Federal Reserve’s monetary policy response to the crisis comprised of a wide range of collateralized lending programs, which were funded by monetization. These programs were temporary in nature. But the Fed ignored the fact that Nominal GDP was falling which was actully the root cause of the recession, as the article says. Note that though the Fed bailed out the banks at risk from innumerable bad mortgages, it ignored the root cause of serious recessions: a fall in nominal GDP that had caused much of the damage well before 2009

Also necessary to mention is the role of fiscal policy. The government enacted the American Recovery and Reinvestment Act as an immediate economic stimulus package worth $787 billion (in total $830 billion) on February 2009. The purpose was to end the 2008 recession quickly by stimulating consumer spending and creating or saving around 2 million jobs. It instilled the confidence in the economic agents that was needed to boost economic growth.

However, stimulus failed in its very aim of saving jobs and increasing consumption spending. The failure of the stimulus was a blow to the theory that economies can be brought into action by an injection of government spending. People realized that every dollar injected by the government through spending would eventually be taken out in the form of taxes.

Policy recommendations

The article provides a suggestion that in order to prevent such mistakes in the future, the Fed should switch from targeting inflation to targeting the level of NGDP. Note that when a recession hits, NGDP is the one variable that starts plummeting and it is the one Fed should be agile for. , If it continues to target inflation, it will then be too slow to respond.

The Fed can influence the economy through federal funds rate. This is the rate of interest charged by banks when they lend overnight loans to each other. The Fed does not set the federal fund rate. It targets the range in which it expects the federal funds rate to float. Since it is able to influence the demand and supply of bank reserves through its open market operations, the Fed is able to come very close to hit this target range.

Though the federal funds rate do not directly influence the demand decisions of households and firms, it brings changes in the interest rates on both short term and long term financial instruments like Treasury bills, mortgage loans and corporate bonds. If the Fed is able to lower the federal funds rate, it can then increase banks reserves. Banks can then lend out these reserves to households and firms.

In this sense, the Fed can increase or decrease the liquidity in the market and can stimulate or depress Aggregate Demand. And by influencing Aggregate Demand, the Fed can control price level (inflation) and real GDP (employment), at least in short term.

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Case Study Paper ECON 201 As a sample workforce activity, assume your employer h

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