Assignment:
Please complete the assignment and write your answers in much detail as possible.
Your answers must be typed neatly in a Microsoft Word document (Times New Roman Font, 12pt, Single Spaced with 1 inch margin all around).
You must adhere to the page limits. Your answers MUST BE written as clearly as possible.
DO NOT violate the honor code. DO NOT engage in plagiarism. Plagiarism is an UNACCEPTABLE violation of the honor code.
If you want to know what plagiarism is and how to avoid it then get started by visiting
https://www.plagiarism.org/plagiarism-101/what-is-plagiarism
The Microsoft Word document with your complete answers must be uploaded to the Dropbox (Elearn) inside the folder named Assignment 3.
No hardcopy submission will be accepted.
Please make sure that you submit by the deadline mentioned above.
No late submissions will be accepted
Read the following materials to answers the questions below.
• Chapter Topic - Fiscal Policy (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)
• Chapter Topic - Unemployment and Inflation (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)
• Chapter Topic - Saving, Investment Spending and the Financial System (Available in the e-book on Launchpad. Study materials and lecture notes are available on Elearn)
Answer the questions below in as much detail as possible. All answers must be typed neatly (See the directions above).
1. Describe the role played by expansion in the government sector (funded by budget deficit and public borrowing) in changing prevailing levels of unemployment and GDP. Your exposition should be based on sound economic principles and should have appropriate graphs (like aggregate demand and aggregate supply). (Limit: 2 pages; Ideally, between 1 - 1.5 pages)
2. Describe how sustained budget deficits can lead to interest rate increases and how that might lead to crowding out effect. Do you think that an expansion in the government sector (funded by budget deficit and public borrowing) is good for the savers? Carefully elaborate your argument and provide appropriate graphs wherever you can. (Limit: 2 pages; Ideally, between 1 - 1.5 pages)
3. Describe how an increase in the interest rate may affect the savers, firms, employment numbers and GDP. Given the current scenario, would you advocate a hike in the interest rate by the Fed? Carefully articulate your argument and assume that you are advising the Chairperson of Federal Reserve. Be very careful as your advice may have significant impact on the US economy. (Limit: 2 pages; Ideally, between 1 - 1.5 pages)