Section: TR: 8:30-9:50

Michael Kaelin
E-Portfolio Signature Assignment
Salt Lake Community College
Macroeconomics - Econ 2020
Professor: Heather A Schumacker
Please type your answers to the following questions. If you need to hand draw the graphs on page 3 you may and then scan them as a
separate document. When you have completed this assignment post it to your e-portfolio along with your chosen article and 20 terms
article write up. (20pts) Make sure to put an explanation of the assignments and a reflection statement on your ePortfolio web site.
For examples of reflection prompts please see SLCCs website: https://www.slcc.edu/gened/eportfolio/docs/ReflectionHandout2.pdf.
(10 pts) Link your ePortfolio URL to your MyPage under the student tab so that instructors can view your work. (5pts)
1.

2.

What are the 3 main macroeconomic goals economists would like to see for an economy: (3pts)
1. ______Economic growth_______________________________
2. ______Low unemployment_______________________________
3. ______Low inflation_______________________________
What is the formula for GDP (write out the full name)? Circle or highlight the largest component and fill in the chart. Under each
put the components and something unique. (19pts)

GDP = Consumption+ Investment + Government Spending + Net Exports

Components: Consumption
(This is the largest part of
GDP)
1.Durables
2. Nondurables
3. Services

Components: Investment
1. Business Fixed Investment
2. Construction Investment
3. Inventory investment Goods
Excludes:
1.

Components: Government

Components: Net Exports

Purchases
1.Goods
2.Services

1.Exports
2. Imports

Excludes:

Not include transfers

1.Transfer payments

of ownership, only

2.Paid interest

new capital
3.

What is the problem associated with being at AD2 that makes policy makers concerned? (1pt)
Inflation!

Q1

Q Full
Employment

Q2

REAL OUTPUT (quantity per year)

4.

Who does fiscal and monetary policy? What are 2 fiscal policies and 3 monetary policies to correct a situation where the economy
is naturally at AD* but finds itself at AD2, as seen in the graph on the previous page. Briefly explain how each of these policies
would work to correct the situation. (22pts)
Who does fiscal policy: _______Goverment________________________
1.

Government Spending:
Government spending is used to influence the economy. In a recession the government will boost spending in
order to stimulate the economy. As the government spends more money, the economys purchasing power

2.

increase in order to increase consumption. The goal of government spending is to decrease unemployment.
Taxation:
Taxation is the second tool used by the government to help achieve economic goals. When Unemployment and
inflation levels rise the government will lower taxes in order to increase consumers willingness to spend. This
goes hand in hand with government spending because the more taxes the government brings in the more money
they have to stimulate the economy.

Who does monetary policy: Federal Reserve

1.

Open Market Operations

This is the purchase and sale of securities in the market by banks. This includes stocks and bonds. There are short term
objectives set by the Federal Reserve. The open market will mimic the health of an economy, declining in value in a recession and
increasing in expansion.
2. Discount Rate:
FOMC- selling bonds, public gives money to the feds, this leads to less money in the money supply. This will
cause the interest rate to raise and the aggregate demand curve will shift in because consumers and firms do not
want to borrow money at high interest rates.
3.

Reserve Requirments
As reserve requirement goes up there is less money to loan out, Thus interest rates will increase. Businesses
(consumers) will not make big purchases and thus the aggregate demand in.

5.

Begin in equilibrium in each of the following graphs; draw the effects from question 2 above as they would apply in each graph
below. Next draw the effects of an anti-inflationary policy taken by the fed to correct the result from question 2 - use both graphs.
Explain what is happening in each graph and overall in the economy as the due to the anti-inflationary policy. (20 pts)
Money Supply and Money Demand Graph
Nominal
Interest Rate
Aggregate
Demand and
Aggregate Supply

Money Supply Curve (MS)

MS2
PL

Interest rate
Real GDP

AD2

AS1
AS2

Money Demand (MD)

6.

AD1

In problem 2, aggregate demand is shifting out. This shows and increase in Aggregate demand. This happens when the
money supply goes down increasing the demand for money. As the demand for money goes up the interest rates go up
with it. When interest rates go up there is less motivation for consumers and businesses to consume and invest. Effects
like these are always going on in the market place which is where the government and the feds come into play trying to
better the economy with the tools available. In this case the government would decrease taxes and increase spending in
order to raise aggregate demand. The Feds will use open market operations, reserve rates, and the discount rate. In the
short run the graph will move to from (AS1, AD1) to (AS1,AD2). Than in the Long run the will adjust to (AD2, AS2).

Given the situation our economy has been in the past several years why have fiscal and monetary policy had a difficult time
getting us back to the optimal level of GDP. (5pts)

The reason the economy has been having such a hard time getting out of the slump is because the federal reserve and the government
have used up their tools to fix the problem. The government cannot lower taxes and or increase spending because the government has

hit the maximum debt level. The federal reserves has the interest rate as low as it can go which means the only way to overcome this
challenge is to suffer through the pain.

7.

FRED: Follow the instructions for this assignment on PDF handout.

Before you start, make sure to log in to your free account so that you can save your graphs!
FRED unemployment graph:
Watch the video Introduction to FRED and complete your own unemployment graph. Instead of using St. Louis use Salt
Lake City. Have the graph span the last 10 years. Write about what inferences you can make from this graph. Save and paste
the graph here: (5pts for the graph and 5 pts for write-up)

The unemployment rate is a strong indicator of how an economy is doing. From this graph we can spot the recession that
happened from 2008-2009. The unemployment rate in this period has almost doubled. As it peaks in 2010 the rate slowly starts to head

back to the stable rate. This shows the typical recession pattern. The government put out large stimulus packages in the time of the
recession in order to increase consumers willingness to spend.

8.

List the 3 types of Unemployment, define each, and put a star next to those that are included in the natural rate of
unemployment. (8pts)
1. Frictional Unemployment:
Between Jobs This unemployment is caused by workers in the economy that have useful and marketable

9.

2.

skills and have been fired or laid off and are now in search of a new job.
Structural Unemployment:
This is a type of unemployment that is caused by workers that is caused by a mismatch between the skills that

3.

workers in the economy can offer and skills demanded of workers by employers.
Cyclical Unemployment:
This is unemployment in the economy caused by a recession.

What is the difference between nominal and real, why is each important? (4pts)
Real and nominal differ in the fact that real, whether its GDP, interest, or inflation, is adjusted for inflation. Nominal GDP is
not adjusted for inflation. Both of these are important in order to take in to account the true rate and the inflation rate. With
these rates we can make inferences about the economy and to better our financial decisions.

10. FRED Create a GDP graph following the instructions on the handout:
Based on the graph, what is the Real Personal Consumption Expenditures for the second quarter of 2008?
$10,061.00
Based on the graph, what is the Real Government Consumption Expenditures and Gross Investment amount for the second
quarter of 2008?
$2951.988
Based on the graph, what is the Real Gross Private Domestic Investment amount for the second quarter of 2008?
$2517.50
Based on the graph, what is the real net exports of goods and services amount for the second quarter of 2008? (4pts)
$(-623.00)
11. Write about what inferences you can make from this graph. Save and paste the area graph here: (5pts for the graph and 5 pts

One thing we can infer from this graph is how we got into so much debt. As consumption nearly doubles every twenty years the
exports to imports have slowly been going into the negatives. Which means we are buying more than countries are buying from us.
Investment and government expenditures have stayed at a steady pace which is good. Personal consumption has gone up far more.
This could be attributed to increased improvements in technology.

12. Change the graph type to a pie graph:

Put the curser over the pie graph: What is the value of the current Real Personal Consumption Expenditures
in billions of chained 2009 dollars and what % of GDP is it

66.0%

What is the value of the current Real Government Consumption Expenditures and Gross Investment
billions of chained 2009 dollars and what % of GDP is it

17%

$2870.60

in

17%

What is the value of the current Real Gross Private Domestic Investment Expenditures
chained 2009 dollars and what % of GDP is it

$11330.70

$2852.70

in billions of

(6pts)

Paste the pie graph here: (3 pts)

Use the excel sheets provided to complete this problem. Scenario 1: If the initial deposit into a bank is $5,000 and the reserve
requirement is 10% use formulas to fill in the chart all the way to completion (where there will be 0 for new deposits). Use formulas
and cell references whenever possible. Fix the cell references for the reserve requirement when entering your formulas on the first
line such that you can drag your information down the rows. Fixing a cell reference is done by putting dollar signs in front of the cell
row and column references ex. $B$3 this will mean that no matter where you copy that cell to it will always refer to cell B3. For
scenario 2, change the reserve requirement to 40%. (20)