Take-home Exam
ECON 2103A (Due date: April 24, at 11:35 am)
It has to be done individually, and you must submit your exam via Culearn.
Assume the Canadian economy is at the equilibrium with output ?? and price ?? and then the COVID-19
shock hits the economy. Study the possible impacts of this shock on the following cases of the economy:
Demand Side (AD): (1.5 points)
a) What is the effect of COVID-19 shock on the IS curve (Note: start with the impacts on the Keynesian
cross and then explain the impact of the shock on the IS curve.) Support your analysis with
corresponding graphs.
b) Assuming the price is still ??, what will be the impact of the shock on the AD curve? Briefly explain
your answer using a corresponding graph.
c) How can the government alleviate the negative effects of the shock on the AD curve? Briefly explain
your answer by using just one example.
Supply Side (SRAS): (2 points)
d) What is the impact of the shock on the SRAS curve? Draw the graph. Support your answer using a real
example.
e) What kind of policy can the government implement to alleviate the negative impact of the shock on
SRAS?
f) What are some side-effects of these policies (parts c and e ) on the economy? Briefly explain.
g) What will be the new equilibrium of the economy if the government does not intervene? Draw AD
and SRAS curves for before and after the shock in one graph.
Money: (1.5 points)
h) According to the portfolio theories of money, what are the factors that affect the demand for money?
How they affect the demand for money? Briefly explain.
m) Considering the portfolio theories and given Figure 1 that shows the stock price in Canada. Do you
think that the demand for money will decrease or increase? Why?
n) Following the COVID-19 shock, the Bank of Canada announced that they want to purchase the
governments bonds in the secondary market. Given the function of the supply of money (M= cr + 1
cr + rr
B)
and considering your answer for part h, do you think that the supply of money will increase/decrease/or
uncertain? How? Explain your answer briefly.
Investment: (1.5 points)
p) Define Tobin’s q and explain how it will determine the investment in an economy?
q) Considering the definition of Tobins q and given Figure 1, what will be the impact of COVID 19 shock
on the investment. Briefly explain.
Figure 1. Stock Price
r) Following the COVID 19 shock, the Bank of Canada declined the overnight interest rate to almost zero
( 0.25%). What will be the impact of this policy on the business fixed investment (Briefly explain it using
the classical investment theory that we discussed in the class). Draw the graph.
s) Lots of firms laid off their employees temporarily; however, assume that the government of Canada
will pay more than half of the salary of those employees if the firms call them back for work. What is the
impact of the governments policy on the investment? Briefly discuss it using the classical investment
theory that we discussed in the class. Draw the related graph as well.
Inflation and Philips Curve: ( 1 point)
t) Following the COVID-19 shock, lots of people lost their job. What are the impact of that on inflation in
the short-run and in the long-run? Draw the related graphs.
u) What will be the effect of expected inflation following the shock? What will be the impact of this
expected inflation on the realized inflation in the economy? Explain briefly.
Consumption (1.5 points)
v) Following the shock, the value of your primary house that you are living there decreased and also you
laid off for one month. What will be the impact of these changes on your consumption according to
v1) Keynes? Explain it briefly.
v2) Modigliani? Explain it briefly.
v3) Friedman? Explain it briefly.
Short Essay (6 points)
Using 250 words, explain the money helicopter (around 50 words) and then discuss the impacts of this
policy (about 200 words) on the economy following the COVID-19 shock. You can discuss both the
pros (about 100 words) and the cons (about 100 words) of this policy.
(The references or any graphs will NOT count as part of the 250 words. Your essay cannot be less than
225 or more than 275 words)
Please note that every single sentence of the essay must be your own work and plagiarism is a very
serious offence at Carleton. Your essay may be checked with some online tools for Plagiarism.
You can submit your essay either in Word or PDF.
3 points for the analysis and 3 points for the quality of writing.
Some suggested resources for the short essay:
https://voxeu.org/article/helicopter-money-today-s-best-policy-option
https://voxeu.org/article/helicopter-money-time-now
https://www.ft.com/content/abd6bbd0-6a9f-11ea-800d-da70cff6e4d3
https://www.opendemocracy.net/en/oureconomy/helicopter-money-answer-looming-economic-crisis/
https://www.cbc.ca/news/business/covid-19-economy-helicopter-money-friedman-1.5507417

During the Great Recession, like any other economic downturns, as unemployment rises, aggregate income declines to cause a major decline in tax collections. On the other hand, with the rise in unemployment, spending on safety net programs rise. So, there are not too many good options available to resort to the health of the national economy.  It will be very difficult to defend cuts in the federal government programs and especially the programs geared to sustain the minimum of the standard of living for the recent poor. So, the government needs to increase its borrowing. Deficit spending refers to government spending exceeding what it brings in federal income and corporate taxes during a certain period. Deficit spending hence increases government debt. Most economists accept that deficit spending is desirable and necessary as part of countercyclical fiscal policy. In such a case, government increases its borrowing and hence its deficit to compensate for the shortfall in aggregate demand. This is derived from Keynesian economics and has been the mainstream economics view.  Following John Maynard Keynes, many economists recommend deficit spending to moderate or end a recession, especially a severe one. When the economy has high unemployment, an increase in government purchases creates a market for business output, creating income and encouraging increases in consumer spending, which creates further increases in the demand for business output. (This is the multiplier effect).  This raises the real gross domestic product (GDP) and the level of employment and lowers the unemployment rate. Government borrowing under such circumstances increases the demand for borrowing and thus pushes interest rates up. Rising interest rates can “crowd out” (discourage) fixed private investment spending, canceling out some of the demand stimulus arising from the deficit

Write an essay analyzing the advantages and disadvantages of deficit spending and the effects of federal government borrowing on the economy i.e., the crowding out effect.

The assignment title is:
“Asses the most important macroeconomic impact(s) of the covid-19 pandemic”

I need an extremely technical macroeconomic analysis of the current state of the coronavirus (Covid-19) on the world economy. I want you to look at how certain countries have reacted, and mention that not every country is affected equally (this could be done in two sentences). I want you to use OECD and other government accredited sources, as well Wall Street Journal, Financial Times, Bloomberg… basically very accredited economic sources. I want you to look at how rational choice theory will be affected… as I mentioned before, quite technical and really ANALYSING. The class is a second year economics class and is titled Economic Theory and Application.

Some things to consider:
How governments reacted, with QE in the USA, shifts in demand and supply, different market failure and specific industry-wide bankruptcies, affects this may have on income distribution and inequality, as well as a broader problem of unemployment, speak about inflation, deflation, and monetary policy, how this may create another bubble & crash and how governments are taking measures to mitigate this from happening (touch upon debt and increases in government debt), and fiscal policy.

The company being used for the calculations and analysis is CARVANA which is a publicly trades comapny.

The purpose of this assignment is to evaluate the financial condition and performance of the firm you and your CLC group members have selected for analysis.

Refer to Tables A-1 through A-5 in Appendix II of the text for the operational definitions of and formulas for numerous common financial ratios, including profitability, liquidity, leverage, activity, and shareholders’ return. Using these formulas, complete at least one ratio from each of the five categories, though you may apply as many of the ratios for which you can find the required information in the firm’s financial reports. On your calculations page, specify for which formulas you are solving.

In an assessment of approximately 750 words, address the following:

    Determine which of the ratios provide the most key insights into the firm’s current level of performance. How can you assess whether the results of your calculations are positive or negative? Explain which of the ratios give you reason to be concerned with the organization’s current strategy and why.
    The Organizational and Operational Plans assignment references the possible benefits and risks of forming a strategic alliance. What would be the risks of forming a strategic alliance in terms of the firm’s profitability ratios? Which of those five ratios is most likely to reveal immediate information for analysis of the alliance’s effectiveness?
    Considering today’s financial climate, how likely is it that the organization could acquire the capital necessary to support an aggressive value-enhancement strategy? From where would that capital originate? Compared to current interest rates, what do you believe is a realistic interest rate the firm might incur? Which of the liquidity ratios will be impacted by the influx of capital, if borrowed?

Submit your calculations with your written response.

You will be required to incorporate instructor feedback from this paper into the Assessing and Managing Risk assignment in Topic 7.

Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.

This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.

locate a current article that discusses marketing challenges, issues, or strategies related to a consumer product or service. The article should highlight how marketing is being used to respond to consumer behavior. Use an appropriate source (ex. Fortune, Business Week, The Wall Street Journal) to identify a current article (published within the last 5 years) that considers how consumers gather data and formulate decisions that ultimately guide their behavior.

Write a brief overview of this article, then respond to the following items:

identify key marketing challenge(s) and relate them to specific consumer behavior issues discussed in this module;
describe consumer behaviors in this particular situation, and discuss other, related consumer behaviors that may also be present in real-world situations;
propose marketing recommendation(s) and strategies; and
list some pros and cons of your proposed strategies.

How has the Internet changed the nature of the information search as a step in the consumer decision-making process? And think about a recent purchase, whether you were looking for a hotel or seeking a vacation destination, or even buying a new car, to what extent did both internal and external search play a role in your decision-making?

The requirements for this project are as follows: Each group will take a situation and create a simple, game
theoretic model which that group will solve. This situation can be a scene from a movie, a game, or a realworld scenario. Original thought should be the center of this idea, so you should not take an example directly
from an example that I discussed in class or from a paper that you find. Groups should push themselves
to either write down a more general model, or to look at different versions of the game they are analyzing.
For example, writing down a prisoners dilemma and solving is not sufficient for a good grade on the project.
The situation that you pick should be inspired by your interests. This paper should be no less than 3 pages,
double-spaced, with 12 pt font. Instead of analyzing a model in this way, students may also choose to run an
experiment in the class to test the predictions of game theory.
In this project, you should clearly outline what you are modeling and why it is interesting. You should
then clearly define the model, meaning that you should write down the players, the strategy space, and the
payoffs. You should also go through a simple example that gives a flavor of what the solution looks like, and
you should conclude by discussing your predicted solution and how it ties in to the situation you are modeling.
Students who choose to run an experiment should still follow the same steps above, but should detail why
they are running an experiment. In addition, students should detail the results of the experiment and why
they match or mismatch the theory.