Question 1
It is John Maynard Keynes’s 133th birthday. You have been asked by a leading economic journal to write a short article celebrating the legacy of this great man. Explain, giving real world examples why the principles and theories he advocated in 1936 are still relevant today for both developing and developed economies. Focus on how Keynesian theories were formed during the Great Depression (e.g. lack of aggregate demand creates unemployment) and used most recently during the Recession of 2008-09. Cite examples and state your assumptions. There is no right answer. I would like to see you Keynes’s theory and policy recommendations with observations from the world today. You can choose one or more country to illustrate your argument or draw from several examples.
Question 2
Governments around the world were stunned that Mindonesia survived the 2008/2009 crisis largely unscathed. Some say this was due to high domestic consumption. Finance Ministers from emerging economies with rapidly growing middle classes have asked you to write a short briefing note explaining why this occurred. Draw macroeconomic principles from class to support your assumptions. Explain the role of consumption in boosting aggregate demand, the tradeoffs they may want to consider between consumption and other drivers, and the factors that may affect the propensity to consume. Use diagrams to illustrate your points if appropriate.
OR
Question 3
You are the governor of the Central Bank of Brokeistan. You see a Phillips curve with low inflation but high unemployment The President has asked you to devise a short-term policy to reduce unemployment. Explain your approach and the underlying assumptions using the tools at your disposal and macroeconomic principles from class. Devise a step-by-step approach with diagrams. You can include multiple options for the President to consider. Consider the factors that cause unemployment, the tradeoffs you may have to make with inflation, and the relationship of unemployment with aggregate demand. It is important not to just say you will do ‘this’ and ‘that’ will happen. Explain the reasons why these outcomes will happen, again sticking closely to macroeconomic principles.
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