Interest rate effect on the housing market

Essay Topic

For the past 7 weeks, you have learned a variety of macroeconomic concepts and theory. Now it is time for you to develop a short research paper, using those concepts and theory!

First clink the link below and read the news article, “A January Pause, but Fed Affirms Plan for Gradual Rate Increases”

Then, select and provide short essays on three out of the following four questions

Question 1

Janet L., Yellen, Fed chairwoman, said the Federal Reserve is planning to gradually increase the interest rate in 2016. How would this affect the housing market? Explain this using graphical analysis you learned from this course. Your discussions should include the change in house prices and the change in the demand and supply for houses. Make sure your discussion should be at least 500 words in total.

Question 2

Mr. Dudley mentioned that the Federal Reserve also should focus on job growth. Can an increase in the interest rate achieve that goal? Explain this using graphical analysis you learned from this course. Make sure your discussions should be at least 500 words in total.

Question 3

Below is from one of paragraphs of the article.

“They are raising interest rates before that happens because monetary policy exerts a gradual influence on economic conditions, and they are concerned that inflation will begin to rise too quickly. Mr. Dudley said that when the Fed needed to regain control of inflation, it generally ended up causing a recession”

If inflation is the problem, what type of fiscal policy might help mitigating inflation? Explain using graphical analysis (Aggregate demand curve). Make sure your discussions should be at least 500 words in total.

Question 4

Suppose the Federal Reserve decided to increase money supply in the U.S. market. Would it affect the interest rate? Also, what can you say about its short-run and long-run effect on the overall price (P) and output (Y)? You must provide graphical analysis (Use AD, SRAS, and LRAS curves) and your discussions should be at least 500 words.

(I will not review your unfinished draft for this particular assignment. If you have any question(s) regarding this assignment, email me to set up an individual WebEx meeting)

2 pages for each scenario.
Essay must be typed.
Font size: 12pt
Double spaced with 1” margins
Students MUST provide graphical analysis, and narrative discussions in detail for each question to receive full credit

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