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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.