ECON633 INTERMEDIATE MACROECONOMICS

The purpose of the Assignment is for learning and skills acquisition as much as it is for marks.
The Assignment will help you practice the application of useful software, and to gain other skills.
However, in particular, the Assignment should help you master our most important model, the
Mundell-Fleming IS-LM / AD-AS / IP model of the open economy. This will be of direct
advantage to you as this is the basis for several possible Final Examination questions.
By now in lectures we have covered the Mundell-Fleming model, and of course it is also fully
explained in the textbook. This assignment tests your mastery of the model.
Your task is to build, in Powerpoint, an explanation of the effect on the economy of an
expansionary Monetary Policy.
Use the Custom Animation function to show the shifts of curves and changes in other
variables, in the right sequence.
By now you will have seen an example of this in lectures. Use textboxes to give brief
explanations of what is happening at each stage of the adjustment process from SR to LR.
Showing the shifts of curves in the correct sequence, and explaining those shifts and other
changes, will be excellent preparation of a similar question is asked in the Final Exam. Fit the
entire exercise on a single Powerpoint slide (as seen in lectures, on one diagram on the board).
As with so much of what we do, the purpose is not simply to accumulate marks. The purpose is
to help you understand the model, which will then help you answer a very similar compulsory
question in the Final Exam (which in turn will help create a strong case that you have mastered
the key material in the Unit, as a basis for passing the Unit overall).
You already have all the basics of the model from lectures. This will be a fairly simple example;
you will see for instance that there are only three AD curves in the lecture example (and in the
textbook version, only two). The small number of curves is achieved by omitting a lot of details;
in your assignment you can be more adventurous (it is possible for example to have four or five
AD curves, to more fully show the sequence of changes in the economy caused by the change
in monetary policy). Keep in mind though that in your attempt at this question in the Final Exam,
given the time constraint, you will need to avoid too complicated a diagram. You can keep this
in mind when doing your assignment (which after all is practice for that exam question).