About the exercise
1.This is a completely voluntary exercise
2.Choose any one of the three case studies that can be found in page 2 onwards for the analysis
3.You can work in groups but submit your own work. If you have worked with friends, then mention who those friends are.
4.Use legible graphs wherever possible to explain the crisis and the government response. Write brief explanations where necessary
5.This extra credit will be out of 10 points. Half of the total score will be allotted to each midterm in order to boost your grades.
Description of What you need to do:
The following case studies provide some facts about how a crisis begins and what sort of government (or international) response follows the crisis. For all case studies, use either the classical or the Keynesian economy (chapter 6 and chapter 13) models to explain how the crisis began. Then briefly analyze how government response alleviated this crisis and what impact it has in your models. Also, put yourselves in the shoes of these policy makers the government and the central banks and discuss what might you have done better to alleviate the crisis. Keep in mind that there is no right or wrong answers. Mention the positives and the negatives of the decisions you take for example, would you rather lower interest rates at the risk of the currency depreciating and give reasons why you think this policy response is better than the current one.
For Full Credit
1.Students must demonstrate they have grasped the concepts from chapter 6 and 13 appropriately.
2.State your assumptions clearly, (small vs. large economy), (long run vs short run), (fixed vs floating exchange rates)
3.All graphs and explanations must demonstrate the basic intuition of the model and should clearly explain the crisis and the policy recommendations.
4.I expect to see 3 graphs (or more) and 3 short paragraphs with explanations of the graph how the crisis begins, the government (and/or the central bank) response and your policy recommendations.
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thanks a lot for helping.

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