3-4 pages macroeconomic homework

ECON 1001 CRITICAL THINKING WRITING ASSIGNMENT

  OBJECTIVE: Demonstrate your ability to identify, understand, and analyze major microeconomic principals at work. ASSIGNMENT: Review the economic scenario based on the fictional island nation of Yawuvia. Prepare an analysis of the situation with recommendations per the instructions provided below in the rubric and in the scenario. As this paper builds on the material covered in class each week, it is recommended that you develop the content of your paper as we progress in class. This is an ANALYSIS paper asking you to  demonstrate that you possess a superior understanding of, and ability to use the concepts described in class. Define your position in broad terms and use basic, readily available information to justify it; do not dwell on precision. PROVIDE A 3-5 PAGE REPORT ADDRESSING THE POINTS OUTLINED BELOW. SCORING IS AS FOLLOWS:

0 POINTS Student does not address point.

4 POINT Student does not demonstrate understanding of principal.

8 POINTS Student provides a partially correct answer

12 POINTS Student provides a correct but incomplete answer.

16 POINTS Student provides a complete and correct answer.

20 POINTS Student provides a complete and correct answer and demonstrates a superior understanding of, and ability to use the concept. PLUS 10 points for following ALL instructions

FORMAT: All reports are to be typed, stapled in the upper left hand corned, NO cover page. INSTEAD, submit a copy of the rubric page with your name on it. Check off each box on the rubric page as you address the points in your paper. Name and page number on each page. All external sources are to be referenced. All assumptions are to be identified. The due date has been posted on ulearn. Your paper must be structured as follows:

Section 1: Executive Summary. (Write this last.) Section 2: Status of Economy. (Rubric bullet 1) Section 3: Description of market for water. (Rubric bullet 2) Section 4: Description of potential positive and negative externalities. (Rubric bullet 3) Section 5: Proposed strategy. (Rubric bullet 4) Section 6: Expected change to key economic indicators. (Rubric bullet 5)

SCENARIO The small island nation of Yawuvia has no natural source of fresh water. Since the nation’s founding, its water needs have traditionally been served by a single private firm, Yawuvia Water Company (YWC). The firm has collects rainwater and stores it in its huge underground cistern, maintains a distribution network and sells water to homes and businesses. The supply of water therefore depends upon the amount rainfall during a given period. And the operation of YWC is manually intensive and requires many people. In fact, the YWC is the nation’s largest employer.

Consequently, the cost of water is very high in Yawuvia, resulting in a high cost of living and preventing many people from living on the island, a lack of industry and higher than desired unemployment.

The government has decided that it would be beneficial to reduce the cost of water on the island and would like to reduce unemployment and increase economic growth (GDP). It has hired you to analyze the situation and propose a strategy to accomplish those goals.

Keep in mind that total national production (GDP) equals 1.75 * amount of water produced. Also, the natural rate of unemployment for Yawuvia is 5.2%.

ECON 1001 CRITICAL THINKING WRITING ASSIGNMENT  

RUBRIC:

NAME: 0 4 8 12 16 20

SCORING CRITERIA

1. Describe the nation’s economic status. Calculate the measure, describe trends and their possible causes, and outline the government’s goals for he following key economic measures: a. GDP, Real GDP, GDP per Capita, Population b. Unemployment rate c. Inflation Rate d. Use Okun’s Law to identify Potential GDP

2. Describe the market conditions that would have to exist to reduce the cost of water identifying the determinants of supply and demand and providing examples.

3. Identify potential Positive and Negative Externalities if the conditions described above existed.

4. Propose fiscal and monetary policies to: a. Achieve the nation’s goals; and, b. Mitigate the effects of any negative externalities.

5. Outline how your strategy will affect the key economic measures listed in bullet 1.

BASIC ECONOMIC DATA Water

2014 2015 2016* Total Domestic Consumption (Demanded Quantity) 290M gallons 281M gallons

Quantity imported 30M gallons 30M gallons Quantity exported 0 gallons 0 gallons Quantity produced by YWC 260M gallons 251M gallons Total Quantity Supplied 290M gallons 281M gallons Price (per gallon) $ .1 $. 116**

* What will it be after implementing your recommendations? ** price increased 16% due to lack of rainfall and subsequent reduction in supply Employment Consumer Price Index

2014 2015 2016

CPI 103 107

use this formula to determine the effect of the

change of the price of water 2016 CPI

= 107 * [(% change of price of water)/4]

2014 2015 Not in labor force 45,000 46,000 Employed – Full Time 18,000 18,000 Employed - Part Time 7,500 7,500 Unemployed 2,500 2,500 Discouraged 7,000 5,000 Total Population 80,000 78,000