Federal Reserve Bank Case Study
( 11/24/21, 6:54 PM ) ( Extra Credit: Case Study )
You will be given a hypothetical economic situation and are tasked with applying your economic prowess to fix the economy. Your response should be 1½ – 2 pages (400-600 words). There are a multitude of “correct” answers and you should provide a unique description and explanation for your answer. This type of assessment helps you demonstrate your own knowledge while also helping to prevent and detect plagiarism. You do not necessarily need to use all of the information in the scenario to successfully answer the questions. Read the full scenario and all questions before you begin your response.
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The country of Argonia has experienced an expansionary period with rapid growth for the past 10 years leading to their rGDP doubling during this time. Recently there was a large earthquake that ended this phase and threw the country into a severe recession. Currently the rGDP has dropped by $10 million below the full employment level. The average inflation rate is 3%, the money multiplier is 4, the natural rate of unemployment is 6%, the current unemployment rate is 35%, and the government debt is 200% of rGDP.
- Choose to act as either the Federal Reserve Bank or the Federal government and explain your choice.
- Explain what actions you would take to fix the economy. (Be as specific as possible – including timeline, actual policy choices and calculations if applicable).
- Explain how effective you expect your policy choices to be. What are the limitations of your agency’s impact on the economy?
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