Week 3 will help students develop an understanding of what money is, what forms money takes, how the banking system helps create money, and how the Federal Reserve controls the quantity of money. Students will learn how the quantity of money affects inflation and interest rates in the long run, and production and employment in the short run. Students will find that, in the long run, there is a strong relationship between the growth rate of money and inflation. Students will review the basic concepts macroeconomists use to study open economies and will address why a nation’s net exports must equal its net capital outflow. Students will demonstrate the relationship between the prices and quantities in the market for loanable funds and the prices and quantities in the market for foreign-currency exchange. Student will learn to analyze the impact of a variety of government policies on an economy’s exchange rate and trade balance.
Resources: National Bureau of Economic Research
Develop a 2,100-word economic outlook forecast that includes the following:
- Discuss how government policies can influence economic growth.
- Analyze the history of changes in the following key variables a) GDP, b) savings, c) investment, d) real interest rates, and e) unemployment. In a table, produce a five year forecast using acutal data from 2015 and 2016 forecasting the key variables through 2018.
- Analyze how monetary policy can theoretically influence the long-run behavior of price levels, inflation rates, and employment.
- Consider the impact of the very low Federal Funds Rate which exists today on the ability of the Federal Reserve to affect your theoretical influences mentioned above.
- Describe how trade deficits or surpluses can influence the growth of productivity and GDP.
- Discuss the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan.
- Recommend, based on your above findings, whether the strategic plan can be achieved and provide support.
Use a minimum of three peer-reviewed sources from the University Library.
Format your paper consistent with APA guidelines.