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1. [For this question focus on the business cycle material



).] Assume that you

work for Atlantis National Bank. You were discussing the current economy

over a burger at lunch with your boss, not surprising given all the current

talk of inflation and recession, and she learned that you are taking a

course in applied macroeconomics. It turns out that as a bank executive

she has always been curious about economic downturns: just what exactly

is a recession and how are the dates of recessions determined? Lucky

you. She asks you to send her an interoffice memo that explains in clear

language the definition of a recession as well as information on who

determines the dates of a recession, what methods are used to set the

dates, including what data are tracked to determine the timing of business

cycle peaks and troughs. (This is the format I want you to use, please – an

internal memo format; and be as formal or informal as you would in an

actual memo to your actual boss.) Use as your sources in preparing this

memo the following from the NBER website: the statement on the

determinants of the dates; the tab on frequently asked questions; and the

memos announcing the peak and the trough of the 2007-09 Great

Recession and/or the very short pandemic recession. Part of your job in

this memo is to determine what is important to tell her and what questions

about the process need to be answered and what are those answers are.

An example or two from the memos might help illustrate exactly how the

NBER does its work. In closing let your boss know whether knowing the

timing of the cycle will be as important to your banking firm as it would be

for a company such as Navistar that makes trucks and busses or a food

provider such as McDonald’s.

2. As noted in the first question the issue of recession is front and center in

the minds of Americans. Assume that you have been chosen to be an

economic advisor to the U.S. President and you have been asked to have

ready for his policy team a White Paper on the general characteristics that

would constitute an ideal and effective fiscal policy to deal with the

economic slowdown caused by the pandemic. Note that this is a summary

of policy in general, not a specific policy for this fiscal situation. In the

White Paper set out (and use hypothetical examples if appropriate or

needed to make your point):

? What is the central concept behind the use of fiscal policy in a

market economy?

? What are the likely root causes of recessions and why might fiscal

policy be necessary to soften the downturn?

? What are the general characteristics of an ideal fiscal policy?

? What are our general policy options and what are the strengths and

weaknesses of these options?

? What is fiscal policy devised to accomplish with regard to the major

indictors of the economy, i.e., how would we measure success?

? How will fiscal policy ideally be financed and why does financing


? What lasting effects, if any, should this policy have on behavior and

the economy?

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