ECO 509 ECO 502 – Analysis of Business Conditions Essay 2 Dr. Michael S. Miller Directions: Answer both questions. They are worth 25 points each. Length per question: 2.0 – 3.0 pages, double spaced....

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ECO 509
ECO 502 – Analysis of Business Conditions
Essay 2
Dr. Michael S. Miller
Directions: Answer both questions. They are worth 25 points each. Length per question: 2.0 – 3.0 pages, double spaced.
1. [For this question use the course materials on business cycles and access the website of the NBER, with a focus on the business cycle material (https://www.nber.org/research/business-cycle-dating ).] Assume that you work for Atlantis National Bank. You were discussing the current economy over a burger at lunch with your boss, not surprising given all the current talk of inflation and recession, and she learned that you are taking a course in applied macroeconomics. It turns out that as a bank executive she has always been curious about economic downturns: just what exactly is a recession and how are the dates of recessions determined? Lucky you. She asks you to send her an interoffice memo that explains in clear language the definition of a recession as well as information on who determines the dates of a recession, what methods are used to set the dates, including what data are tracked to determine the timing of business cycle peaks and troughs. (This is the format I want you to use, please – an internal memo format; and be as formal or informal as you would in an actual memo to your actual boss.) Use as your sources in preparing this memo the following from the NBER website: the statement on the determinants of the dates; the tab on frequently asked questions; and the memos announcing the peak and the trough of the 2007-09 Great Recession and/or the very short pandemic recession. Part of your job in this memo is to determine what is important to tell her and what questions about the process need to be answered and what are those answers are. An example or two from the memos might help illustrate exactly how the NBER does its work. In closing let your boss know whether knowing the timing of the cycle will be as important to your banking firm as it would be for a company such as Navistar that makes trucks and busses or a food provider such as McDonald’s.
2. As noted in the first question the issue of recession is front and center in the minds of Americans. Assume that you have been chosen to be an economic advisor to the U.S. President and you have been asked to have ready for his policy team a White Paper on the general characteristics that would constitute an ideal and effective fiscal policy to deal with the economic slowdown caused by the pandemic. Note that this is a summary of policy in general, not a specific policy for this fiscal situation. In the White Paper set out (and use hypothetical examples if appropriate or needed to make your point):
· What is the central concept behind the use of fiscal policy in a market economy?
· What are the likely root causes of recessions and why might fiscal policy be necessary to soften the downturn?
· What are the general characteristics of an ideal fiscal policy?
· What are our general policy options and what are the strengths and weaknesses of these options?
· What is fiscal policy devised to accomplish with regard to the major indictors of the economy, i.e., how would we measure success?
· How will fiscal policy ideally be financed and why does financing matter?
· What lasting effects, if any, should this policy have on behavior and the economy?
Answered 2 days AfterJul 10, 2022

Answer To: ECO 509 ECO 502 – Analysis of Business Conditions Essay 2 Dr. Michael S. Miller Directions: Answer...

Tanmoy answered on Jul 13 2022
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Title: ECO 502 – Analysis of Business Conditions
Contents
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Solution 2.    6
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Solution 1.
Business Memorandum
Date: 11th July, 2022
To
The CEO,
Mrs. Monica Gartner,
Atlantis National Bank
From: Christine Witek
Subject: The important facts of Recession
Due to intense curiosity displayed by the CEO of the
Atlantis National Bank on recession, I will be discussing on the significant facts of recession and the way in which the dates are being estimated. Further, we will also determine who regulates the dates on which the recession happens and the various methods used for determining those dates. Finally, we will track and evaluate the data which will be used for analyzing the exact time of the business cycle’s peak and troughs. This will ultimately help Mrs. Monica to know the timing of the cycle which will be significant for Atlantis National Bank. Further, she can compare the impact of recession of banks against its effect on other companies such as Navistar which is famous for making large motor vehicles such as trucks and buses.
Recession is a macroeconomic word which results in substantial deterioration in the common economic activities of the nation or a specific region. In recession there are instances of weakening in the economic activities for two consecutive quarters. Therefore, when there is recession, we can observe decline in the gross domestic products along with various other monthly indicators such as heightened unemployment rate. Further, the impact of recession can be clearly observed through low production by industries, decline in the real-income of the individual citizens of the nation and waning in the wholesale and retail businesses (Anderson).
It is the National Bureau of Economic Research (NBER) who are responsible as well as accountable for determining the starting and end dates of the recession process. More precisely, it the committee which is known as the Business Cycle Dating Committee in NBER which makes decisions related to recession. As per NBER, recession is a drastic reduction in the economic actions which is prevalent across various economies, which can last for even few months or years and its negative impact are highlighted in the real-income, employment, missing various opportunities and in the manufacturing process. Therefore, it can be clearly stated that a period of recession begins when the economy of a nation reaches the peak of the activities and the recession diminishes when it gradually falls to the trough (Jagerson).
It is NBER who looks at various factors which helps to determine if there is a recession or not. But recession is not confined to a particular industry or sector and is comprehensive in nature. It is due to this reason the committee focuses on economy-wide measures of the economic activity. The committee determines the months with respect to the troughs and peaks based on monthly measures with respect to the real economic activity which is issued by the US Federal Statistical Agencies. Hence, for measuring the months of the troughs and peaks the committee deducts the transfers from the real personal income. Further, there is deduction of payroll employment amount which is non-farm in nature, the employment which are evaluated using the survey in the households, the real personal consumption expenses, the sales which are wholesale-retail and is modified due to the changes in prices and the industrial production. Yet there are no specific set of rules or measures which can help to process the data or the manner in which they can be used for evaluating the decisions. But in the last two decades, the NBER committee have put two measures on calculating the real personal income are the transfers and the nonfarm payroll employment.
It is based on the pertinent economic activity in that particular...
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