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ECN202A

Intermediate Macroeconomics

2021

1 During the global pandemic, the data show an unprecedented surge in initial claims. Initial claims are a good proxy for separating employment matches.  Use the two- sided search model to argue for a set of policy interventions that (a) subsidise the search costs faced by firms and (b) aim to raise the efficiency of the matching process.  Which one of these would be more effective in stimulating employment and output?

2 The global pandemic has caused private household consumption to fall.   Use a two-period model of consumption with consumption taxes to argue that both fis- cal policy (a policy controlling the timing of taxes keeping government spending constant) and monetary policy (a policy controlling the real interest rate) can be used to increase current consumption. For reference, the consumer’s intertemporal budget constraint should be written as:

Explain why in this version of the model the timing of taxes matters.

3 An effective vaccine against  COVID-19  has  been found and will  be distributed around the world soon! Use the real intertemporal model with investment to anal- yse the potential macroeconomic effects of this piece of good news.  [Hint, assume that such a discovery would raise consumer confidence and raise the productivity of employed factors once it arrives]