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Summer term coursework cover sheet

ECON0016: Macroeconomic Theory and Policy


Please read and follow all these instructions before your submission deadline so that we can ensure anonymity in marking and compliance with UCL assessment policies.

1.    All answers must be uploaded via Turnitin using the link provided in the module Moodle page. Students with SORAs have one additional week for submission.

2. All work must be submitted anonymously. Do not put your name on any file name or inside any document. Only use your Candidate Number in your submission, do NOT

use your Student Number. Your Candidate Number is a combination of four letters plus a number, e.g.  ABCD9.

a) Name your file using CandidateNumber-ModuleCode.pdf or

CandidateNumber-ModuleCode.docx. For instance, if your Candidate Number is ABCD9, your file should be named as ABCD9-ECON0016.docx or ABCD9-ECON0016.pdf.

b)       Also Include your Candidate Number in the first page of your submission (top left corner) together with the word count.

c)       You can find your Candidate Number (SCN) in your PORTICO account, under “My Studies” then the “Examinations” container.

d)       Note that the Candidate Number is NOT the same as your Student

Number (8 digits, e.g. 12345678), which is printed on your UCL ID card. Submitting   with your Student Number will delay marking and when your results will be available.

3. Allow enough time to submit your work. Waiting until the deadline for submission

risks facing technical problems when submitting your work, due to limited network or systems capacity. As guidance, we expect that after reading the coursework, it will take you two hours to review the material and no more than three hours to complete the assessment. The submission window is more than one week so that you deal with other assessments and exams that might need be to be submitted in the same time period.

4. Prepare a Word or PDF file to submit your work. To prepare this file, please observe the following:

.    Type your answers using word processing software (such as Microsoft Word or any other alternative).

.     For equations, you can also type them using word processing software or you can write them by hand, take a photo or scan, and insert the image at the appropriate point in the file that you will submit. In this case, write your Candidate Number on the drawing and make sure it is visible in the photo.

.     For graphs or diagrams, you can draw them using word processing software or you can draw them by hand, take a photo or scan, and insert the image at the appropriate point in the file that you will submit. In this case, write your Candidate Number and make sure it is visible in the photo.

5.  When you are responding to a question, do not copy the question text into your answer as this will increase the Turnitin similarity score of your submission, instead indicate the question and sub-question number in bold and with a larger size font.

6. Your work should not exceed the word limit set in the instruction. This includes

footnotes and any tables containing large amounts of text. The word count does not include your figures, mathematical formulae, bibliography or references, data tables or  tables with short amounts of text. If your submitted answer exceeds the permitted word count stated, Faculty Word Limit Penalties will apply as follows.

a.   For work that exceeds the word count by less than 10%, the mark will be reduced by five percentage points, but the penalised mark will not be reduced below the pass mark: marks already at or below the pass mark will not be reduced.

b.   For work that exceeds the word count by 10% or more, the mark will be reduced by ten percentage points, but the penalised mark will not be reduced below the pass mark: marks already at or below the pass mark will not be reduced.

7.   In cases where a student answers more questions than requested by the assessment,

the policy of the Economics Department is that the student’s first set of answers up to the required number will be the ones that count (not the best answers). All remaining answers will be ignored.

8.   If you suspect there is a problem with one or more questions of your assessment, do not communicate with the module leader or any student, including Q&A forums on the Moodle page. Make a reasonable assumption about what the question means and continue to complete and submit your assessment. Use the Coursework Query Form available on the module Moodle page to convey your query and, if relevant, any assumptions that you have made to enable you to complete the question(s). Include the filled Coursework Query Form as the first page of your submission.

9.   This is an open book assessment, and hence you are allowed to consult any of the

module materials or other published sources. However, you are banned from collaborating or communicating with other students or any other third party regarding this assessment.

a.  Assessment irregularities include (but are not limited to) plagiarism, self-plagiarism, collaboration with students or anyone else, sharing your assessment, access to another student’s assessment, falsification, contract cheating, and falsification of extenuating circumstances.

b.  We will use specialized software which compares your work with published

sources, as well as with work submitted by other students (including from other universities and previous years) to detect a possible assessment irregularity.

c.   If a possible assessment irregularity is suspected related to your assessed work or your extenuating circumstances, it will be notified to the Chair of the Board of Examiners immediately and you will be informed of any steps taken, in line with the UCL procedures. We reserve the right to use tools allowed under the UCL regulations, including an oral viva (including online) to check a candidate’s understanding of work submitted.

d. Penalties for assessment irregularities range from an adjustment to your marks to exclusion from UCL.

e.  All students should make themselves familiar with what is considered a breach of assessment regulations and what the potential penalties are as detailed in the UCL regulations https://www.ucl.ac.uk/academic-manual/chapters/chapter-6-student-casework-framework/section-9-student-academic-misconduct-procedure. UCL has produced a guide to help you identify and avoid plagiarism:

https://www.ucl.ac.uk/students/exams-and-assessments/plagiarism, however note that the UCL regulations on assessment irregularities are much broader and include examination irregularities other than plagiarism, such as, for example, collaboration among students (collusion) and contract cheating.

10. To avoid plagiarism, it is very important that you provide citations in parenthesis and a

reference list. This link from the UCL Library provides information on appropriate referencing: https://www.ucl.ac.uk/library/libraryskills-ucl/guides-and-elearning/references-citations-and-avoiding-plagiarism. It is very important to provide the references, but students will not be marked down because of mistakes in the format of the references.

11. You will be awarded a mark of 0% in this assessment if you do not submit it or, if you attempt so little of the assessment that it cannot be assessed. Please check the UCL Academic Manual (Section 3.11) for information on the consequences of not submitting or engaging with any of your assessment components. See below for instructions on what to do if you are affected by Extenuating Circumstances.

12. If you have extenuating circumstances, students from the Economics Department should submit these on Moodle at: https://moodle.ucl.ac.uk/mod/assign/view.php?id=1791539 . Students from other departments need to submit these to their home-departments.

13. The assessment submission area has been set up to allow work to be submitted late.

This is in place for those with permitted extensions due to SORAs or Extenuating Circumstances. If you submit your work after the deadline and do not have a permitted extension due to a SORA or Extenuating Circumstance your work will be subject to late penalties as set out in UCL’s Academic Manual (Section 3.12 - https://www.ucl.ac.uk/academic-manual/chapters/chapter-4-assessment-framework-taught-programmes/section-3-module-assessment#3.9). These penalties will be applied by the Departmental Tutor as appropriate.

14. Once your submission has been accepted you will return to the 'My Submissions' tab where you will be able to see the details of your submission. If your submission is not confirmed for some reason, or you are having issues uploading the document, get in touch with ISD ([email protected]) as soon as possible to figure out what the problem might be. You should also alert the Departmental Tutor, Dr Frank Witte ([email protected]). Do not contact the module lecturer to preserve anonymity.

15. Answer all questions from Part A and all questions from Part B.  Each question in Part A carries 4 per cent of the total mark, which means Part A is worth 48 per cent; Part B carries 52 per cent of the total mark.

16. You agree with the following: “ By submitting this assessment, I pledge my honour that I have not violated UCL's Assessment Regulations which are detailed in https://www.ucl.ac.uk/academic-manual/chapters/chapter-6-student-casework-

framework/section-9-student-academic-misconduct-procedure, which include (but are not limited to) plagiarism, self-plagiarism, unauthorised collaboration between students, sharing my assessment with another student or third party, access another student’s assessment, falsification, contract cheating, and falsification of extenuating circumstances.”


ECON0016: Macroeconomic Theory and Policy

TIME ALLOWANCE: as speciied in the submission window

Answer all questions from Part A and all questions from Part B.

Each question in Part A carries 4 per cent of the total mark, which means Part A is worth 48 per cent; Part B carries 52 per cent of the  total mark.


Answer all questions from this section.  For each question, identify the statement as True, False, or Uncertain, and explain your reasoning (in total of not more than 100 words).  The maximum marks for each question will be given for a full and correct explanation. You may use written, diagrammatic, and mathematical arguments as appropriate.

A.1 Fixed investment by private irms is sensitive to monetary policy.

A.2 A fall in productivity has no impact on the optimal monetary-policy response curve (monetary rule curve) used by a central bank.

A.3 A government that runs a constant primary deicit cannot stabilise its debt.

A.4  If wage setters and price setters use adaptive expectations, the credibility of a central bank’s ability to change the inlation target does not matter.

A.5 When the economy is away from the zero lower bound for nominal interest rates, there is often a conlict between iscal policy and monetary policy.

A.6  Conventional monetary policy is efective in stabilising asset prices.

A.7  Ceteris  paribus, a surprise  announcement of a rise in the world interest rate will be followed by a period during which home’s exchange rate is depreciating (where home is a small open economy).

A.8 The reason why a depreciation is predicted to improve the balance of trade is that the demand for exports and imports is relatively sensitive to prices.

A.9 An economy emerging from a recession will always show a deterioration in the private sector inancial balance.

A.10  For a member of a common currency area, the use of iscal policy to stabilise country- speciic shocks is unnecessary.

A.11 The “Monetary Rule” or MR curve is downward-sloping in a diagram with output on the horizontal axis and the inlation rate on the vertical axis.

A.12 A permanent cut in government spending (with no change in taxation) can result in a new medium run equilibrium with higher unemployment and lower real wages in an open economy with an inlation-targeting central bank.


Answer all parts of question B in a total of not more than 1600 words. Answers must be typed; igures and equations can be hand-written and pasted into the document; you may also paste data charts and simulation output as appropriate.

Quantitative Easing (QE) is a tool that central banks can use to purchase government debt, corporate debt or other assets. This policy is referred to as QE or asset purchases.  Several rounds of Quantitative Easing were used in the UK. The following data records cumulative bond purchases by the Bank of England up to each date shown

2009: $200 billion;

2012: $375 billion;

2016: $435 billion.

(a)  Use the models you have studied to explain why central banks used Quantitative Easing as a policy tool following the inancial crisis.  [13 marks]

(b)  Explain the expected transmission mechanisms from the policy choice to economic activity highlighting your assumptions about the assets purchased by the central bank and the constraints faced by economic agents including the central bank.  [13 marks]

(c)  How does the openness of the economy afect your analysis in the previous two sub questions? How is your analysis afected by the fact that the shock was a global one?  [13 marks]

(d)  The ECB announced the extension of its asset purchase programme on December 3rd 2015. This was known as QE2 because it was the second round of the ECB’s quantitative easing policy.  Use column (2) of Table 1 to report what happened to the euro exchange rate (deined as euro/dollar) when the QE2 policy was announced.  Is the outcome con- sistent with the predictions of economic theory?  [13 marks]

Table 1: Impact of ECB QE2 Policy.

Source: M. Middeldorp and O. Wood, Bank Underground 4th March 2015.