Microsoft Word - ECN101 Spring 2022 MACRO Unemployment Inflation Policy Supply Shock.docx
ECN101 – PRINCIPLES OF ECONOMICS
Macro Assignment
Answer the following questions using the information given in the text below. It is your responsibility to
efer to alternate sources to make your arguments in answering questions asked. Make sure you have
answered all of the questions and that you provide appropriate APA referencing where required.
Questions
1. Discuss the difference between real and standard unemployment. What are the metrics used
y BLS (Bureau of Labor Statistics) US to define the types of unemployment? Refer Charts
(released by BLS) for the period (Jan 2020 – Jan 2022) and explain the macro factors behind
the trendline.
2. How does inflation impact the health of the economy, please elaborate one positive and one
downside of having high inflation? Illustrate this with a real economic scenario, you can
choose any country worldwide for this answer, (the scenario should have occu
ed/occu
ing
in real time, predictive scenarios would not count towards the answer)
3. It is expected that oil and gas prices would decrease in 2022, assuming this happens explain
the impact, a decrease in the oil and gas prices would
ing on the economy and how would
it impact the real GDP of the US economy?
4. Do you agree with the Fed’s policy of the interest rates kept under check in the pandemic hit
economy, provide your reasons for your choice of Yes/No
5. How do you explain the situation of the supply shock in the US economy vis-à-vis labor
shortage and “the great resignation”? What is the long-term impact of these on the US
economy?
The US economy has been in an unprecedented situation ever since March 2020, about the time
the pandemic hit global economies on a massive scale – the US economy was not an exception.
The US economy has recovered since then, but there is lot of ground to be covered before the
economy can be said to be in the state it was pre-pandemic. Post vaccination and cu
ently the
economy is opening up and gradually moving towards a state of well-being, the whole economy
has to be recali
ated to
ing it into positive te
itory.
The critical components of the economy are GDP (Gross Domestic Product), unemployment,
inflation, interest rates, they serve as key performance indicator (KPI) for the functioning state of
the economy. Additionally, other factors like oil and gas prices and climate change becomes
equally important in deciding the health of the economy.
Gross Domestic Product:
The most critical
economic indicator
is GDP, which
measures the
nation's production
of goods and
services. Gross
domestic product
(GDP) is the total
value of everything
produced within a
country's borders.
The components of
GDP include personal consumption expenditures (C), business investments (I), government
spending (G), exports (X), and imports (M). GDP is equal to C + I + G + (X - M)
The new recession, which began in March 2020, ended 128 months of expansion, the longest in
U.S. history. In Q2, the economy contracted by a record 31.2%. Quarterly GDP had never
experienced a drop greater than 10% since record-keeping began in 1947
In April 2020, retail sales were down 14.7% as governors closed nonessential businesses, but by
May sales recovered, increasing by 18.3% as shops and restaurants slowly reopened safely. While
there have been several months in late 2020 and early 2021 with small declines, none have been
as dramatic; by June 2021, sales were up 0.6%.
Also, in April 2020, the unemployment rate skyrocketed to 14.8% as companies furloughed
workers. It remained in the double digits until August, when it began to steadily decline. In the
week ending January 9, 2021, though, claims rose to 904,000. That marked the largest number
of initial claims filed since mid-August.
The economy recovered in the third quarter (Q3) of 2021 expanding by 33.8%. Although a record,
it was not enough to offset earlier losses, including the 5% decline in real GDP at an annual rate
in the first quarter, signalling the onset of the 2020 recession.
According to the most recent forecast released at the Federal Open Market Committee (FOMC)
meeting on June 16, 2021, U.S. GDP growth is expected to rise by 7% in 2021. It is estimated to
then drop to a 3.2% growth rate in 2022 and slow further to 2.4% in 2023
Unemployment
The Federal Open Market
Committee (FOMC) estimated the
employment rate to be 4.5% for
the year2021. It is expected to
gradually decline in the coming
years, down to 3.8% in 2022 and
3.5% in 2023. The rate spiked to a
number in the range of 14.8% in
April 2020 as workers were
eleased from their jobs in
esponse to the pandemic. The
unemployed rate is ratio of the
number of unemployed people
and total labour force. As per the
metrics of Bureau of Labour US, the people who are not actively looking for the job are not
counted as part of the unemployed population. The unemployed criteria therefore extend to two
possible economic interpretation, real and standard unemployment. The real unemployment
also includes the discouraged and marginally attached workers.
Jobs
The Bureau of Labor Statistics US (BLS) publishes an occupational data each year that goes into
great detail about each industry and occupation. Overall, the BLS expects total employment to
increase by six million jobs over the period of next 8 years.
Inflation
The core inflation rate was predicted to be 3% in 2021, dropping to 2.1 in 2022 and 2023. The
Fed's target inflation rate has always been 2%. The core inflation rate—the Fed's prefe
ed rate
when setting monetary policy—does not include gas consumption and food prices.
Interest Rates
In March 2020, the FOMC held an emergency meeting to address the economic impact of the
COVID-19 pandemic, which lowered the fed funds rate to a range of 0% and 0.25%.Oil and Gas
Prices
The U.S. Energy Information Administration (EIA) provides an outlook on oil and gas prices from
2020 to 2050. In June 2021, crude oil prices averaged $73 per ba
el for Brent global, $33
a
el
higher than in June 2020.
The EIA estimated that this will remain stable throughout the second half of 2021, with decreases
in the year 2022.
Climate Change
The Federal Reserve is concerned about how climate change will affect the economy. Research
from the Richmond Fed estimates that, if the country continues to produce emissions at a high
ate, climate change could reduce the annual GDP growth rate by up to a third of the historical
average.
In 2020, the U.S. experienced damage from both hu
icanes and wildfires, as it has in past years.
Global damage from natural disasters associated with climate change, such as hu
icanes, floods,
and wildfires, was $210 billion in 2020, up significantly from $66 billion in 2019.
Grading Criteria (What constitutes a good assignment?): Grading criteria judges the following:
§ Adequacy of research. Evidence of sufficient
eadth and depth of research and sufficient and
appropriate sources and data. Please cite at least 5 different sources, with at least one from a
peer-reviewed journal or published book. Data sources must be clearly identified. The assignment
must contain a reference list or bibliography.
§ Use of Concepts: The assignment must make specific reference to microeconomic concepts,
frameworks and theories introduced during the course.
§ Graphs and Figures: The assignment must contain at least one graph and one figure. Where the
graph may illustrate a concept or represent actual data relationships such as a trend-line, bar
chart, scatter plot etc. The figure may be a map, photo, or drawing etc. Please label figures and
graphs and cite data sources.
§ Form: Is the writing clear, professional, logical and well presented?
§ Content: Does the content adequately do what the assignment specifies? Is the analysis intelligent
well-constructed?
REFERENCES:
Economic trends to watch in 2021. J.P. Morgan. (n.d.). Retrieved January 3, 2022,
from https:
www.jpmorgan.com/commercial-banking/insights/5-economic-trends-to-watch-
in-2021
Amadeo, K. (2021, October 6). US economic outlook for 2021 and Beyond. The Balance. Retrieved
January 3, 2022, from https:
www.thebalance.com/us-economic-outlook XXXXXXXXXX
The Balance. (2018, January 8). The balance. The Balance. Retrieved January 3, 2022,
from https:
www.thebalance.com/
Cambon, S. C. (2021, November 18). U.S. unemployment claims steady in tight job market. The
Wall Street Journal. Retrieved January 3, 2022 from https:
www.wsj.com/articles/weekly-
jobless-claims XXXXXXXXXX XXXXXXXXXX
Kelly, J. (2021, December 10). The 'great resignation' is a workers' revolution: Here's what real
leaders must do right now. Fo
es. Retrieved January 3, 2022,
from https:
www.fo
es.com/sites/jackkelly/2021/10/08/the-great-resignation-is-a-workers-
evolution-heres-what-real-leaders-must-do-right-now/?sh=5f546b6f514f
The Wall Street Journal. (n.d.). Breaking news, business, Financial & Economic News, World News
and Video. The Wall Street Journal. Retrieved January 3, 2022, from https:
www.wsj.com
Microsoft Word - ECN101 Spring 2022 MACRO Unemployment Inflation Policy Supply Shock.docx
ECN101 – PRINCIPLES OF ECONOMICS
Macro Assignment
Answer the following questions using the information given in the text below. It is your responsibility to
efer to alternate sources to make your arguments in answering questions asked. Make sure you have
answered all of the questions and that you provide appropriate APA referencing where required.
Questions
1. Discuss the difference between real and standard unemployment. What are the metrics used
y BLS (Bureau of Labor Statistics) US to define the types of unemployment? Refer Charts
(released by BLS) for the period (Jan 2020 – Jan 2022) and explain the macro factors behind
the trendline.
2. How does inflation impact the health of the economy, please elaborate one positive and one
downside of having high inflation? Illustrate this with a real economic scenario, you can
choose any country worldwide for this answer, (the scenario should have occu
ed/occu
ing
in real time, predictive scenarios would not count towards the answer)