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Name: Sergio Lopez-Peralta Section: 525-F17

E-Portfolio Signature Assignment


Salt Lake Community College
Macroeconomics - Econ 2020
Professor: Heather A Schumacker

Please type your answers to the following questions in the text boxes. 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, make sure to include all
pieces including your reflection statement. Link your ePortfolio URL to your My.slcc.edu under the Academics and Records tab
(scroll almost to the bottom and it is on the right side of the page) 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. Economic Growth
Econo

2. Low Unemployment

3. Low Inflation

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 Exp. + Investment Exp. + Government Exp. + Net Exports

Components: Components: Components: Components:


Circle the largest sub-category
1. Durable 1. Capital/Investment Goods 1. Goods 1. Imports

2. Non-Durable 2. Construction 2. Services 2. Exports

3. Services 3. Inventory

Excludes: Excludes:

1. Stocks/Bonds 1. Transfer Payments

2. Interest on National

Debt

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

Expansionary Gap Inflation

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: Government [Congress (Plan) President (Final Decision)]
1.
Increase Taxes

This helps reduce inflation because the main goal in an inflationary period is to reduce spending. If
there is a reduction in spending this can directly halt economic growth which in turn effects inflation.
An increase in taxes reduces the incentive to spend more.

2. Reduce Government Spending

In line with the previous explanation when increasing taxes the goal is to reduce spending. Fiscal
policy involving a change in government changing spending levels reduces the level of Aggregate
Demand thereby reducing inflationary pressure.

Who does monetary policy: The FED

1.
Increase Interest Rates

The goal of a monetary policy should be to reduce the amount of money in circulation if it is going to
reduce inflationary pressures. If the interest rates are increase there is greater incentive for individuals
to save. In addition to this increased interest rates increase the cost of borrowing, discouraging
consumers from borrowing and spending.

2. Increase Reserve Requirements

The idea is the same here as the goal is to reduce the amount of money in circulation. If the amount of
money banks are legally required to keep on hand to cover withdrawals increases, then there is less
they have to lend to consumers. With less available to lend, consumers are then spending less.

3. Selling of Bonds

This is a good example of a contractionary policy in order to reduce the amount of money in
circulation. The selling of bonds slows down the economy as it increases other factors that contribute to
a reduction in the overall circulation of money.
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
Money Supply Curve (MS) Aggregate Supply

AS

PL
i

AD
Money Demand (MD)
Real GDP

MS2 MS1
MS
Inflation
Monetary Policy

AD1

AD2

Explanation: Though the graphs are a bit of an exaggeration due to the limitations of the word document the intention
is to explain what happens during inflation and a contractionary policy to reduce inflation. When discussing the
money supply an increase in the money supply in circulation increases the demand for money which then increases
inflation. In order to control this monetary policy seeks to reduce the amount of money in circulation by increasing
the interest rate, the reservation requirement for banks, or the selling of bonds. Each of these policies seeks to reduce
the amount of money in circulation and therefor reduce the amount of consumer spending in order to curtail an
inflation. When we discuss AD and AS the goal of a fiscal policy is to reduce spending. During an inflation AD
increases creating an inflationary gap between where the equilibrium point would be. In order to curtail this a
reduction in spending is what is sought out by the government using Fiscal policy. Increasing taxes, and reducing
government spending reduces AD which then in turn brings AD back from an inflationary gap.
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)
The problem that we currently face is that the fiscal and monetary policies placed by the government and the fed are
not enough to pull us out of where we currently are. The government continues to spend more than the amount of
money that is coming in and we continue to raise our debt ceiling. This makes fiscal policy a problem. With the
recent reduction in interest rates its hard to curtail inflation because there is no incentive to reduce spending. These
problems combined makes is so we continue to hit stagflation which is a persistent high inflation combined with high
unemployment and stagnant demand in a countrys economy.
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)

Write-up: There are a couple of things that can be inferred from this graph. (1) There is greater job availability in
SLC, (2) both civilian unemployment rate and SLC unemployment rate have been on a steady decline, (3) SLC
experienced a reduction in the slump during the recession in comparison to the nation, (4) a lot of the technology
jobs have been a good investment for the overall employment rate of SLC.
8. List the 3 types of Unemployment, define each, and highlight the names of those that are included in the natural rate of

unemployment teal. (8pts)

1.
Structural Unemployment

Unemployment of workers over lengthy intervals resulting from skill mismatches with position
requirements of employers and from fewer jobs being offered by employers constrained by
governmental business regulations and labor market policies.

2.
Frictional Unemployment

Unemployment due to the fact that workers must search for appropriate job offers. This activity takes
time, and so they remain temporarily unemployed.

3. Cyclical Unemployment

Unemployment resulting from business recessions that occur when aggregate (total) demand is
insufficient to create full employment.

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

The difference between nominal and real values can be defined using the context in the text book. Nominal
values are the values of variables such as GDP and investment expressed in current dollars, also called
money values; measurement in terms of the actual market prices at which goods and services are sold. In the
context of time this would mean the current value at the present time. Real values are measurement of
economic values after adjustments have been made for changes in the average of prices between years. In the
context of time this would mean the actual value adjusted for the value changes over time.
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 2017?

11,852.958

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

quarter of 2017?

2,895.230

Based on the graph, what is the Real Gross Private Domestic Investment amount for the second quarter of 2017?

2,924.674

Based on the graph, what is the real net exports of goods and services amount for the second quarter of 2017? (4pts)

-613.6300

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)

Write-up: From the graph you can infer several things: (1) personal consumption level is much higher than any other
consumption level, (2) domestic investment was higher than government consumption in Q2 of 2017, (3) even though we are
mostly a service economy personal consumption is much higher than government computation levels, (4) our next exports have
been operating in the negative for several years meaning we are satisfying our consumption expenditures through a greater
amount of imports than we are though exports.
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 11,921.136

in billions of chained 2009 dollars and what % of GDP is it 67.0%

What is the value of the current Real Government Consumption Expenditures and Gross Investment 2,897.990 in

billions of chained 2009 dollars and what % of GDP is it 16.3%

What is the value of the current Real Gross Private Domestic Investment Expenditures 2,976.985 in billions of

chained 2009 dollars and what % of GDP is it 16.7% (6pts)

Paste the pie graph here: (3 pts)

System would not allow to present information in chained 2016 dollars so information is presented in 2009 chained dollars.
13. Use the excel sheets provided to complete this problem.
1. 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.

Scenario 1:
Initial Deposit = 5,000
Reserve requirement = 10.00%
Money Multiplier = 10
How many banks will it take to go through the multiplier process? 131
What will the Total New Deposits be? $44,999.96
How much in Total Excess Reserves will there when the multiplier process completes? 0
How much money will be created? $44,999.96

2. For scenario 2, change the reserve requirement to 40%. (20)

Scenario 2:
Initial Deposit = 5,000
Reserve requirement = 40.00%
Money Multiplier = 2.5
How many banks will it take to go through the multiplier process? 27
What will the Total New Deposits be? $7,500.00
How much in Total Excess Reserves will there when the multiplier process completes? 0
How much money will be created? $7,500.00

14. Article:
The purpose of this article assignment is that it requires practical application to real world issues and written
communication skills are worked on.
Students will be expected to find an article (they can be from the internet, magazines, newspapers, etc.) that relates to
different economic topics that have been discussed in class that you can attach to a word document (make sure if it is
coming from the internet to include the URL). The article needs to be accompanied by a typed assessment that will: 1)
present a brief summary of the article (no more than 5 typed lines) and 2) explain how the article relates to a minimum of
20 specific economic concept that were covered in this class. For each unique term highlight the key term and put it in
bold, use superscripts to number each key term, then in parentheses define each key term, and then demonstrate/explain
how it is used/relates to the article. For example: This article discusses goods1 (tangible items) such as bananas. The
workers who pick the apples are providing a service2 (an intangible item).
Type the assessment of the article on a word document. The top line of the document should include your name and
the name of the article. Change the margins for the entire document to 0.75. When you are finished writing create a page
break and attach the article you are writing about. (20pts)

15. Reflection:
Make sure to put an overall explanation of the assignments are and a reflection statement on your ePortfolio web
site. Your reflection statement should analyze what they have learned in this class, how it applies to other classes that
they have taken or are taking, and how they think it is going to benefit them in the future. For other examples of
reflection prompts please see SLCCs website: https://www.slcc.edu/gened/eportfolio/docs/ReflectionHandout2.pdf. (10
pts)