Money Market and Loanable Funds Markets Project
Goal: Students will be able to identify, analyze and evaluate the money supply and demand curves, and the impact on loanable funds markets.
Role:
You are a financial analyst for HSBC (a commercial bank) in the country of the article you chose (Peru or Mexico).
Audience:
You are going to a meeting with a Central Bank representative who is an economic expert.
Situation:
LIMA, Feb 1 (Reuters) – Consumer prices in Peru rose 0.74% in January, the largest year-
on-year increase in nearly four years as fuel and food prices spiked amid a second wave of coronavirus infections, the government said on Monday. The National Institute of Statistics and Informatics (INEI) said in a statement that the cost of food and beverages, which weigh most heavily on the indicator, jumped 1.43%, while that of fuels and home rentals rose 1.11%.
The increase in prices is the biggest since March 2017, according to government data. The January statistic pushed rolling 12-month inflation to 2.68%, nearing the high end of the central bank’s 1%-3% target range. Peru’s economy likely contracted 11.6% last year as a result of the pandemic, according to official projections. Annual inflation in 2020 hit 1.97%, slightly higher than the 1.90% increase in consumer prices registered in 2019. Analysts believe that the inflation in Peru will continue to rise above the 3% target range within the next 3 months unless there is an intervention in the economy.
Product:
You are to follow the attached rubric and create either a short report or a video presentation. Your product should include the minimum:
An overview of the problem
Graphical representation of the problem (Money Demand/Supply curve, Loanable funds market)
Detailed proposed solutions to the economic problem using monetary policies
Analysis of the proposed solution
Graphical representation of the solution (Money Demand/Supply curve, Loanable funds market, AD/AS model, Investment Demand)
Evaluate the solution, giving a 2 sided argument as to the potential effectiveness and consequences of your proposed economic solution.
Standards Addressed:
The successful student will:
Display an understanding of how to draw accurately labeled graphs or visuals to represent an economic model or market.
Be able to explain how a specific economic outcome occurs or what action should be taken in order to achieve a specific economic outcome and analyze changes in the money market and the Loanable Funds Market.
Analyze and demonstrate the effect of a change in an economic situation on an accurately labeled graph or visual.