Topics in Macroeconomic Policy

This assignment constitutes 100% of the overall mark for this course.

Answer ONE of the following questions in up to 3000 words. A page consisting entirely of diagrams, tables or figures counts as 250 words, and smaller diagrams, tables or figures are counted proportionately.

Penalties apply for exceeding the word limit.

Answer ONE of the following questions. Either
1. How useful is GDP per capita as a measure of happiness? How would you improve on it and what are the consequent policy implications?

There has been an increasing awareness that “money doesn’t buy happiness” and that increasing income per capita does not necessarily mean an increase in welfare. Critically review the evidence in a policy brief. If GDP per capita is not a good measure, should so much attention be paid to quarterly or annual GDP growth rates as a measure of success or otherwise of government policy? If not, what are the implications for public policy?

You should draw on the reading material for this topic in the module. I would suggest looking at the books by Layard; Wilkinson & Pickett; Johns & Omerod; and Snowdon as starting points. The publication by Stiglitz et al is very long, so you will have to read this selectively. You are encouraged to go beyond the recommended reading and use, say, Google to search for other material and internet sites.

Or

2. Why do macroeconomists often not agree? Discuss, with particular reference to the current debate between the Keynesians and the Austerians over the effectiveness of fiscal policy.

In spite of the technical sophistication of macroeconomic theory, it still seems that there is disagreement in the discipline “from the ground up”, leading to conflicting advice over macroeconomic policy. This is nowhere more evident than in the policy debate, at the present time in the UK, over whether there should be greater fiscal stimulus or cuts in government spending (i.e., ‘fiscal consolidation’). You should draw on the recommended reading for this section of the course. You may also find it useful to read the op-eds and/or blogs of Paul Krugman (New York Times), Martin Wolf (Financial Times), Brad DeLong (http://delong.typepad.com/) and the economics editors of the Times and the Guardian.

Or

3. What were the causes of the subprime crisis and what are the implications for macroeconomic policy
In this assignment you should outline the causes of the subprime crises and why it came as a shock to macroeconomic policy makers. Discuss whether it should it have been anticipated and explain why it was not. Has the crisis altered our views about the way he banking sector operates. What policies can and/or have been introduced in an attempt to prevent a similar crisis from recurring? There is an immense literature on this and I suggest that you start with the reading list for this topic, but feel free to go beyond this.