On the 4th September 2014 the European Central Bank (ECB) cut its benchmark interest rate to 0.05%. It will also launch an asset purchase programme, which will buy debt products from banks.
Project description
Write an essay not exceeding 2500 words explaining the ECBs decision and analyzing alternative policies. Your essay should include the following:
The application of the IS-LM model and the AD-AS model to explain the ECBs decision.
The application of the IS-LM model and the AD-AS model to analyse at least one alternative policy that could be used to stimulate the Eurozone economy.
At least four line diagrams, although equations may also be used. If you do not include diagrams in your essay, you will not receive a pass mark.
Some use of data to back up your analysis.
You need to do two things using these macroeconomic models:
1. Explain why the ECB has taken the action it has.
2. Suggest alternative policies that could be followed and use the above macroeconomic models to predict the economic effects of these policies.
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