Name: Tyrell Reiman Section: 501

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 SLCC’s 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. What are the 3 main macroeconomic goals economists would like to see for an economy: (3pts)

1. Low unemployment

2. Low inflation

3. Economic Growth

2. 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 (C) + Investment (I) + Government purchases (G) + net exports (X-M)

Components: C 71% Components: I 11% Components: G 21% Components: Next exports

Circle the largest sub-category
-3%

1. Durable goods 10% 1. Business fixed investment 1. Allocation Needs 1. Exports

2. Nondurable goods 30% 2. Residential investment 2. Distribution Needs 2. Imports

3. Services 60% 3. Inventory investment 3. Stabilization Needs

Excludes: Excludes: Excludes:

1. Purchases of new housing 1.Transers of ownership of 1. Transfer payments

paper assets or real assets 2. Interest paid on the

government debt

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

It is an Inflationary Gap.
 Q1 Q Full Q2 REAL OUTPUT (quantity per year)
Employment

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: Fiscal policy is the use of government spending and taxes to adjust AD. In this case, the fiscal policy

goal is to reduce aggregate demand.

1. Cut Government spending

This would shift the AD2 curve to the left. The budget cuts would directly reduce AD. This would make the

economy go back to its natural level.

2. Raise taxes

This would reduce disposable income thus reduce consumption. This would shift the curve back to the original

one. Raising taxes shifts the AD curve to the left. The result of this would be the economy going back to its

natural level. The tax increase is used to cool down the economy.

Who does monetary policy: Monetary policy is the setting of the money supply by policymakers in the central bank. The

Federal Reserve does monetary policy.

1. Money Supply

Reducing the money supply would shift the curve back to the original one. It would reduce the amount of

money available to lend. By reducing the money supply the economy would reach its natural state.

2. Increase the interest rate

Increasing the interest rate would reduce the quantity of goods and services demanded. This would shift the

curve back to the original one. Increasing the interest rate would return the economy back to its natural state.

3. Sell Bonds

Selling bonds would reduce the money supply and increase interest rates. As interest rates increase, investments

will slow down as will hiring and wages will lower. This will allow the economy to return to its natural rate.
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)
MS1

AS

PL
i

AD
Money Demand (MD) AD1
Real GDP

The money supply and money demand graph are showing the effect on the anti-inflationary policies. The result is that the money
supply decreases which causes nominal interest rates to increase and money demand to increase. This causes a high demand for
money. In the aggregate Demand and aggregate supply graph it shows that the AD line shifts to the left. This causes the equilibrium to
decrease in PL and GDP. This policy is supposed to discourage the economy. There will be less borrowing and spending will
decrease.

6. 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)

It has been hard for fiscal and monetary policy to get us back to the optimal level of GDP because we have a huge financial
debt as a nation. There is not a lot of options to get us out of this debt. One solution would be adding to the budget deficit but
this could lead to another recession. Then fiscal polices haven’t prompted private investments. The new tax cuts have made
business a great deal of money but there is to much uncertain in the economy and they probably won’t invest it into future.
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)

One thing that we can notice about this graph is changes in the economy. We can see when the economy is in a bear market

or a bull market. Then we can see when there is a recession because the unemployment rate increases by a great deal. We can see that

the Salt Lake area unemployment has stayed below the national unemployment rate for most of the time. This means that the Salt

Lake area generally has low lower unemployment than the national level at almost any given time frame.
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. Cyclical unemployment

Cyclical unemployment is the deviation of unemployment from its natural rate.

2. Frictional unemployment*

Frictional unemployment is the unemployment that results because it takes time for workers to search for the

jobs that best suit their tastes and skills.

3. Structural unemployment*

Structural unemployment is unemployment that results because the number of jobs available in some labor

markets is insufficient to provide a job for everyone who wants one.

9. What is the difference between nominal and real, why is each important? (4pts)

Nominal is reported without a correction for the effects of inflation while real is corrected for the effects of

inflation. They are both important because they are useful in comparing different economies to one another.

Nominal
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?

10,005.94

Based on the graph, what is the Real Government Consumption Expenditures and Gross Investment amount for the second

quarter of 2008?

2,974.981

Based on the graph, what is the Real Gross Private Domestic Investment amount for the second quarter of 2008?

2,472.623

Based on the graph, what is the real net exports of goods and services amount for the second quarter of 2008? (4pts)

-550.382

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

for write-up)

We can see that consumers, government, and firms have all increased over this time period. Next exports were slowly gotten

worse over time. It has moved from slightly negative, to significantly negative for the past couple of decades. This means that

consumer taste has change from U.S. produced goods to foreign goods. Some reasons for this are: prices of foreign goods are

lower, some countries restrict U.S. imports, and relatively faster-growing U.S. incomes. Overall, there is more money being

spent and net exports has gotten worse.

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 11,852.958

in billions of chained 2009 dollars and what % of GDP is it 67.1%

What is the value of the current Real Government Consumption Expenditures and Gross Investment 2,895.230 in

billions of chained 2009 dollars and what % of GDP is it 16.4%

What is the value of the current Real Gross Private Domestic Investment Expenditures 2,924.674 in billions of

chained 2009 dollars and what % of GDP is it 16.5% (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)