The economy is currently facing tremendous challenges. For this project, using models that you have learnt in this course, you must advise policy makers what economic policies they should implement; both now, and going forwards. The core of your answer should be based on the IS/LM model.
Your task here is to write an essay of at least 600 and at most 800 words. Your essay should cover two distinct time-periods:
- The pre-vaccine world (whilst we are waiting for a vaccine to be distributed)
- Economic policy includes policy to enable a lockdown (such as paying people to stay home); or maybe you wish to argue lockdown is harmful to the economy.
- Economic policy includes fiscal policy (such as the CARES act) and monetary policy.
- The post-vaccine world (assume we have a vaccine, and overnight the health crisis goes away)
- What advice would you give to policy makers to ensure economic recovery.
- You could discuss the Solow growth model here if you wish.
Base your answer around the IS/LM model. For example, you may wish to explain what happens to the IS curve as a result of reduced consumption (you might like to discuss if reduced consumption is caused by a formal lockdown or people choosing not to eat out etc.) You may also wish to explain the effect of your policies in the context of the model (such as moving the LM curve).
You can compliment your answer with data, and/or the readings found in Covid economy: Minsky and Fisher.
You do not need to discuss everything outlined in this question. I am giving you freedom to be creative, but you must create a narrative based on theory we have learnt in this class. It is your job to produce a report that tells policy makers what they should do (assume they understand the IS/LM model, but you must motivate shifts in the IS curve etc.)
As usual, pay close attention to these instructions, as well as your style, grammar and spelling!
There is not a right and wrong answer for this project, but your views must be well argued. Let me know if you need any clarifications.