Macro & Micro economics Macroeconomic Analysis

Project description
Situation D

After hearing of your taking this course in business economics, Uncle Dan has e-mailed you asking for advice on his 100-acre corn farm. He mentioned how, after 30 years of growing corn, he wishes to leave that commodity’s market and enter a more profitable market instead. He is thinking of subdividing his land and building homes and shops. He reckons he could make a good profit by selling the homes and renting the shops.

Before you can find time to answer Uncle Dan’s e-mail, you read the piece “Will the Fed’s New Policies Revitalize the Housing Market?” on page 896 of the textbook. Recognizing the costs and risks for Uncle Dan in making the switch, you decide to research the economy in terms of GDP growth rate, interest rates, level of unemployment, the business cycle, fiscal policy, monetary policy, international trade, and demographics. You decide to educate yourself about macroeconomics so that you can provide Uncle Dan with the most informed advice possible.

AN INSIDE LOOK AT POLICY Fed Attempts to Stimulate Housing Market… Again
ATLANTIC
Will the Fed’s New Policies Revitalize the Housing Market?
Congress is gridlocked, consumers are pessimistic, and firms are barely hiring. To speed this recovery up—or to prevent a double dip—it might be up to the Federal Reserve. Last week it announced its latest attempt to revitalize the economy. Its chief target appears to be the still anemic housing market. Will the new policies work?
The Fed’s Plan

a The central bank will take two different actions meant to jumpstart the economy. First, there’s “Operation Twist.” The Fed will attempt to push down long-term interest rates by purchasing $400 billion in Treasury securities with six to 30 year terms. The program will last for nine months—through June 2012.
But here’s the clever part: the Fed will sell shorter-dated Treasuries in exchange for bank reserves. This will prevent the Fed from having to expand its balance sheet to purchase longer-term Treasury securities. The relative increase in short term rates should be small, since short-term Treasuries are in high demand….
The Fed announced another policy change as well. It has been reinvesting its maturing principal in additional Treasury securities. The central bank will refine that approach by investing maturing principal from its agency bonds and mortgage-backed securities in additional agency mortgage-backed securities. In this way, it will keep the size of its mortgage securities exposure level. But more importantly, this action will also increase the demand for mortgage-backed securities, which should push down mortgage interest rates.
Briefly you are to research and show how these apply to your scenario: GDP growth rate (20 points), the business cycle (30 points), fiscal policy and level of unemployment (50 points), monetary policy and interest rates (50 points), international trade (40 points), and demographics (20 points).
Macroeconomic Paper as a Professional Report
Your paper should be organized into five parts as listed below.

1. Title Page: Name, class, and date
2. Introduction to situation but do NOT copy the scenario. Briefly summarize the situation and identify the macroeconomic issue(s) to be decided from the perspective of the organization.

3. Relevant Economic Principles: Determinants of Demand, Supply, etc. and Relevant Data
Identify the variables that are critical in addressing the issue(s). Gather and present the relevant data on the variables by searching the DeVry Online Library. Ask a librarian for help if needed. Use in-text citation to report the source(s) of the data. Graphs may be included here.

4. Recommendations and Economic Justification
Formulate and present your recommendations for addressing the issue(s) based on the relevant data and economic principles identified above. Justify your recommendations in terms of the economic impact on those affected.

5. References
List the full references for at least five sources alphabetically in APA format.
Grading Rubric

Section Points earned Points Description
Paper Presentation
10 Good format, citations, lack of spelling errors, etc.; correct Title page and Reference page
Relevant Data:
GDP, Business Cycle, International, Monetary Policy, Fiscal Policy, Demographics

210
GDP (20 points)
Business Cycles, Unemployment, Inflation (30 points)
International (40 points)
Monetary Policy and interest rates (50 points)
Fiscal Policy and unemployment (50 points)
Demographics (20 points)

Recommendations 40
What are your recommendations explained by your analysis?
Total 260

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