Assignment:
1. APPLICABILITY OF MODELS
The topic:
Can you relate the Classical and/or Keynesian macroeconomic models to assumptions about economic behaviors and to economics policies being implemented in the U.S. economy today? Discuss this with your group members. Is there anything that you've learned studying these models that gives you a better understanding of why the Obama administration's economists requested Congress to approve the "stimulus package"? Is there anything that you've learned studying these models that gives you a better understanding of alternative proposals that have been set forth for economic growth (or criticisms of the current policies)?
Note: Please do not just post an answer to each of the questions. These questions are to get you started in your discussion-to make you think. Use one or two of them to get yourself started in relating the models to current economic policies. You will no doubt have your own questions that you will want to ask your class members as well.
2. PROBLEM-SOLVING (SHOW YOUR WORK)
The topic:
Assume an open, mixed economy. That is, foreign trade is part of the economy, and the economy includes both a public (government) and a private (consumers and businesses) sector. Given this, aggregate demand is expressed as (C + I + G + X).Assume the MPC is .7. Assume a stimulus package of $100 billion has been approved by Congress and the money has been spent.In order to pay for those expenditures, Congress also approved a $100 billion increase in individual income taxes. Will these actions by Congress expand or contract the economy or are they just useless actions? Get started early and work with your class members to solve this problem.