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Economics for Policy B
Instructions:
• Things you CAN use:
o Class notes, textbooks, and other course materials
o Online resources, such as academic journals and reputable websites (you need to
refer to those and make sure it passes the similarity report of TurnItIn)
o Your own work, including previous assignments and essays
• Things you CANNOT use:
o ChatGPT or any other AI language model to answer exam questions
o Solutions or answers from previous years' exams
o Work that has been submitted for academic credit in another course or program
o Any other sources that you have not properly cited and referenced in your work
• Plagiarism and academic misconduct:
o It is your responsibility to ensure that your work is original and properly cited.
o Any form of academic misconduct, including plagiarism, will result in a grade of
zero for the exam and possible disciplinary action as outlined in UBC's academic
misconduct policy.
o If you have any questions or concerns about what constitutes academic misconduct
or plagiarism, please consult the UBC policy.
Submission instructions:
• The exam is to be submitted electronically by the specified deadline.
• Combine all 5 answers into one PDF. The PDF should be submitted here on Canvas as well
as TurnItIn by the deadline posted on Canvas.
• Your work should be clearly labeled and organized, with appropriate headings and
subheadings as necessary.
• Graphs should be hand-drawn and pasted within the answers before you convert to PDF.
• You are responsible for ensuring that your submission is complete and legible.
• Grading will be relative so try your best!
• Answers per article should be at least 300 words.
2
Questions 1 (20 points)
Read the attached “Article 1” and answer the following questions:
1. Using the information from the article, illustrate the relationship between stockouts and
inflation using an aggregate demand and aggregate supply (AD-AS) model. How does a
rise in stockouts affect inflation, and how does inflation affect the AD-AS model in the short
run and long run? Explain with examples.
2. Analyze the impact of permanent stockouts on prices, output, and employment in the food
and beverage industry in the United States. Use a supply and demand model to illustrate
your answer. What is the long-run impact of permanent stockouts on this industry?
3. Discuss the effect of the COVID-19 pandemic on the price level in the United States using
the Quantity Theory of Money (QTM). Draw a graph for each model and explain how they
relate to each other.
Questions 2 (20 points)
Read the attached “Article 2” and answer the following questions:
1. Using a supply and demand graph, explain how the Russian invasion of Ukraine could
impact the world’s natural gas prices, given that Europe buys a significant amount of
natural gas from Russia.
2. With the United States banning the import of oil, describe with a graph how this policy
decision could affect the price of oil in the world market.
3. Using proper graphs and examples, explain how the war in Ukraine could lead to
stagflation in Russia, and how this could impact the global economy.
4. Using the aggregate demand and aggregate supply model, analyze how the Russian
invasion of Ukraine could lead to stagflation in Europe, and how governments could
intervene to mitigate this effect.
Questions 3 (20 points)
Read the attached “Article 3” and answer the following questions:
1. Using a graph, illustrate the effects of an expansionary fiscal policy on the economy in the
short run and long run. How can an increase in government spending affect GDP and
inflation?
2. What are automatic stabilizers? Provide an example of how automatic stabilizers work
during an economic recession. Use a graph to support your answer.
3. How can fiscal policy be used to combat inflation? Using a graph, show the effects of a
contractionary fiscal policy on the economy.
4. Discuss the difference between expansionary and contractionary fiscal policy. Provide an
example of when each policy would be appropriate to use. Use a graph to illustrate the
effects of each policy on the economy.
3
Questions 4 (20 points)
Read the attached “Article 4” and answer the following questions:
1. Using graphical analysis, explain the impact of an increase in the money supply on prices
and output in the short run. Provide real-world examples.
2. Discuss the relationship between price and output objectives in monetary policy. How do
central banks balance the two objectives? Provide real-world examples.
3. Discuss the importance of central bank independence in conducting monetary policy. How
does central bank independence influence inflation rates? Provide real-world examples.
4. Compare and contrast the effectiveness of monetary policy and fiscal policy in stabilizing
the economy during a recession. Use graphical analysis and real-world examples to support
your argument.
Questions 5 (20 points)
Read the attached “Article 5” and answer the following questions:
1. How did international spillovers impact the macroeconomic landscape during the COVID-
19 pandemic, and how did they differ from spillovers during the 2008-09 global financial
crisis? Use graphs and examples from the article to support your answer.
2. Compare and contrast the rebound in the labor market during the COVID-19 pandemic to
jobless recoveries in past economic downturns. How did policy shape the evolution of
public and private sector balance sheets, and what role did it play in the differences
observed? Draw relevant graphs and provide examples from the article to support your
answer.
3. What is the role of expectations in driving inflation, and how do central banks attempt to
influence those expectations? Use examples from the article and relevant graphs to explain
the concept of inflation expectations and how they impact the economy.
4. How did the Bank of Canada respond to the economic fallout from the COVID-19
pandemic, and what were the strengths and weaknesses of their response? Use relevant
graphs and examples from the article to support your answer.