Assignment

Purpose of Assignment

Students will example the model economists use to analyze the economy's short-run fluctuations--the model of aggregate demand and aggregate supply. Students will learn about some of the sources for shifts in the aggregate-demand curve and the aggregate-supply curve and how these shifts can cause fluctuations in output. Students will be introduced to actions policymakers might undertake to offset such fluctuations. Students will see why there is a temporary trade-off between inflation and unemployment, and why there is no permanent trade-off.

Assignment Steps

Resources: National Bureau of Economic Research

Select an organization your team is familiar with or an organization where a team member currently works.

Create a 1 to 2-slide Microsoft PowerPoint presentation to present to the organization's Executive Committee.

Include the following items:

• Identify the three key facts about short-run economic fluctuations and how the economy in the short run differs from the economy in the long run.

• Explain economic fluctuations and how shifts in either aggregate demand or aggregate supply can cause booms and recessions using the model of aggregate demand and aggregate supply.

• Explain how monetary policy affects interest rates and aggregate demand.

• Analyze how fiscal policy affects interest rates and aggregate demand.

• Evaluate why policymakers face a short-run trade-off between inflation and unemployment.

• Evaluate why the inflation-unemployment trade-off disappears in the long run.