ECON0016: Macroeconomic Theory and Policy
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ECON0016: Macroeconomic Theory and Policy
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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.
ECON0016: Macroeconomic Theory and Policy
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.
ECON0016: Macroeconomic Theory and Policy
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.
ECON0016: Macroeconomic Theory and Policy
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.
ECON0016: Macroeconomic Theory and Policy
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-studentcasework-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-andelearning/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.
ECON0016: Macroeconomic Theory and Policy
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-frameworktaught-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 (servicedesk@ucl.ac.uk) as soon as possible to figure out what the
problem might be. You should also alert the Departmental Tutor, Dr Frank Witte
(f.witte@ucl.ac.uk). 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.
ECON0016: Macroeconomic Theory and Policy
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-caseworkframework/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.”
SUMMER TERM 2020
ECON0016: Macroeconomic Theory and Policy
TIME ALLOWANCE: as specified 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.
PART A
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 firms 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 deficit 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 inflation target does not matter.
A.5 When the economy is away from the zero lower bound for nominal interest rates, there is
often a conflict between fiscal policy and monetary policy.
A.6 Conventional monetary policy is effective 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).
ECON0016: Macroeconomic Theory and Policy
ECON0016 1 TURN OVER
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 financial balance.
A.10 For a member of a common currency area, the use of fiscal policy to stabilise countryspecific 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 inflation 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 inflation-targeting central bank.
ECON0016 2 CONTINUED
PART B
Answer all parts of question B in a total of not more than 1600 words. Answers must be typed;
figures 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 financial 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 affect your analysis in the previous two sub
questions? How is your analysis affected 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 (defined as euro/dollar) when the QE2 policy was announced. Is the outcome consistent with the predictions of economic theory? [13 marks]
ECON0016: Macroeconomic Theory and Policy
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