CAPSTONE PROMPT: MACROECONOMIC PREDICTION

Overview

Students will be required to complete a macroeconomic prediction as part of a scenario-based approach to show mastery of course learning outcomes. The macroeconomic prediction will include two key assignment deliverables: a prediction draft paper (Capstone 1) and a summary presentation in (Capstone 2). Students will be supported with recommended resources for completing the macroeconomic prediction.

Faculty Advice

This capstone requires you to think like a professional economist analyzing real-world data and policy impacts. Focus on connecting theory to current eventsdon’t just describe what happened, but explain the economic reasoning behind trends and policy decisions. Use the recommended government and institutional sources extensively, as they provide the most reliable data for your analysis. Remember that your prediction should be grounded in economic principles, not just speculation. Pay particular attention to how fiscal and monetary policies interact, as this relationship is central to understanding macroeconomic outcomes.

Learning Outcomes

By completing this assignment, you will learn how to:

1. Explain the concepts of specialization, absolute advantage, and comparative advantage
2. Analyze the key macroeconomic indicators used to measure the performance of the aggregate economy including output, price level, and employment
3. Utilize the aggregate demand and aggregate supply model to explain the amount of goods/services produced, the level of unemployment, and price level
4. Define and analyze the cause and effect of inflation, including the concepts of demand-pull and cost-push inflation, anticipated and unanticipated inflation, and the meaning and effects of hyperinflation
5. Define money, banking, and monetary policy and explain their impact on the macroeconomy
6. Define fiscal policy, budget deficits, and the national debt and explain their impact on the macroeconomy
7. Explain monetary policies of the U.S. financial system, including the nature and functions of money and money supply; the features and functions of the Federal Reserve System; and the tools used by the Federal Reserve to control the money supply

AI Use-Case

Independent Work Requirement: You must complete this Capstone independently without using AI tools. The goal is for you to showcase your own understanding and skills without AI assistance. To do so, you are expected to generate and submit original work developed solely through your own reasoning and effort.

Core Requirements

• Length: 1,000-1,500 words (excluding cover and reference pages)
• Format: 12-point font, double-spaced, APA format
• Citations: All in-text citations and references should follow APA Style
• Sources: At least 4-6 scholarly references required
• Visual Elements: Must include charts, tables, and graphs from research
• Structure: Include outline or table of contents
• Cover Page: Include paper title, name, course number (ECON101), course name (Macroeconomics), institution (StraighterLine), and submission date

Scenario

As a seasoned veteran/investment analyst, you have been assigned management of wealth assets in a portfolio that invests in alternative energy ventures/projects. The division manager has requested a two-year macroeconomic prediction that considers the economic factors which would impact investments in alternative energy projects. The macroeconomic prediction should consider the passage of a combined investment exceeding $1 trillion over the next decade (2021 Infrastructure and Investment Act and 2022 Inflation Reduction Act). These recent examples of fiscal policy will support the economy mitigating and adapting the US economy to a more climate-resilient future.

Detailed Requirements

1. Economic Indicators Review

Instructions

1. Review and report the historical trends in at least two core economic performance indicators (Gross Domestic Product growth rate, inflation rate, the unemployment rate) between 2018 to present
2. Explain the reasons for changes/shifts in each indicator

Recommended Resources

• Gross Domestic Product Bureau of Economic Analysis:
• St. Louis Federal Reserve Bank GDP Growth Rate:
• Inflation Rate Bureau of Labor Statistics:
• St. Louis Federal Reserve Bank Inflation Rate:
• Unemployment Rate and Labor Market Bureau of Labor Statistics:
• St. Louis Federal Reserve Bank Unemployment Rate:
• The Conference Board US Consumer Confidence:

2. Fiscal Policy Review

Instructions

1. Review the 2021 Infrastructure and Investment Act (IIJA) and 2021 Inflation Reduction Act (IRA)including areas of allocation of spending and discuss the impacted sectors within the US economy
2. Discuss the potential gains for investment in alternative energy (EV, carbon emission reductions, etc.), leveraging the public sector investment with private sector ventures/projects likely to impact the retirement fund
3. Evaluate the benefits of Keynesian-based infrastructure investments on alternative energy investments returns

Recommended Resources

• How Did Fiscal Responses to the COVID-190 pandemic Affect the Federal Budget Outlook:
• Fiscal Policy and Excess Inflation During the COVID-19 Cross Country View:
• How Pandemic-Era Fiscal Policy Affects The Level of GDP (Brookings Institution):
• Inflation Reduction Act Summary (Tax Foundation):
• The Inflation Reduction Act: Here’s What’s In it (McKinsey & Company):
• Infrastructure Investment and Jobs Act (IIJA) Federal Infrastructure Hub (Brookings Institution):
• Infrastructure Investment and Jobs Act (IIJA) Macroeconomic Factors May Shape Local Strategies (Brookings Institution):
• Infrastructure Investment and Jobs Act (IIJA)/Bi-Partisan Infrastructure Law (McKinsey & Company):

3. Monetary Policy Review

Instructions

1. Review and report the monetary policy strategies implemented in response to the COVID-19 pandemic (review cycle 2020 to the present) representing a significant shift from expansionary monetary policy in March 2020 to contractionary monetary policy starting in early 2022 to combat 40-year highs in inflation
2. Evaluate and identify a cause-and-effect relationship between higher borrowing costs and the need to mitigate inflationary pressures using the Future of Inflation article summary from the International Monetary Fund () to provide an in-depth explanation of the factors contributing to the dramatic and unprecedented historical response to rising consumer prices
3. Analyze the effects of higher borrowing costs on the required rate-of-return on investments in the alternative energy ventures/projects

Recommended Resources

• What Did the Federal Reserve Do In Response To The COVID-19 Crisis:
• Post-Pandemic US Inflation : A Tale of Fiscal and Monetary Policy:
• What Caused The US Pandemic-Era Inflation (Brookings Institution):

4. Macroeconomic Prediction

Instructions

1. Provide a macroeconomic prediction of the at least two macroeconomic indicators (GDP growth rate, inflation rate, the unemployment rate) over the next two to three years based on information gained from macroeconomic profile of the US economy

Recommended Resources

• Congressional Budget Office Economic Outlook 2024-2034:
• Federal Reserve Board’s Monetary Policy Report to Congress Part III Summary of Economic Projections:

CAPSTONE RUBRIC: MACROECONOMIC PREDICTION

This rubric outlines how your macroeconomic prediction will be evaluated. Each criterion is assessed on a scale from Not Evident (0 points) to Exemplary (3 points). The total possible points for this assignment is 250.

CriteriaNot Evident

(0 Points)Needs Improvement

(1 Point)Proficient

(2 Points)Exemplary

(3 Points)Macroeconomic Prediction Economic Indicators Review

28%

Aligning with the macroeconomic prediction scenario, the student did not complete a review of core economic indicators (GDP growth rate, inflation rate, and unemployment rate, etc.) for the last 5 years utilizing the recommended sources. The economic indicator review should have been substantiated with economic reasoning, data reporting (charts/graphs generated from research), and critical/analytical thought.Aligning with the macroeconomic prediction scenario, the student failed to complete an adequate review of core economic indicators (GDP growth rate, inflation rate, and unemployment rate, etc.) for the last 5 years utilizing the recommended sources. The economic indicator review should have been substantiated with economic reasoning, data reporting (charts/graphs generated from research), and critical/analytical thought.Aligning with the macroeconomic prediction scenario, the student completed a partial review of core economic indicators (GDP growth rate, inflation rate, and unemployment rate, etc.) for the last 5 years utilizing the recommended sources. The economic indicator review should have been substantiated with economic reasoning, data reporting (charts/graphs generated from research), and critical/analytical thought.Aligning with the macroeconomic prediction scenario, the student completes a substantive review of core economic indicators (GDP growth rate, inflation rate, and unemployment rate, etc.) for the last 5 years utilizing the recommended sources. The economic indicator review is substantiated with economic reasoning, data reporting (charts/graphs generated from research), and critical/analytical thought.Macroeconomic Prediction Fiscal Policy Review

28%

Aligning with the macroeconomic prediction scenario, the student did not complete a review of recent fiscal policy initiatives investing in alternative energy and clearly identifies the impacts of leveraging public sector investment with private sector ventures. The review should have reported from recommended sources actual economic investments and connected the investments to the alternative energy retirement funds.Aligning with the macroeconomic prediction scenario, the student failed to complete a review of recent fiscal policy initiatives investing in alternative energy and clearly identifies the impacts of leveraging public sector investment with private sector ventures. The review should have reported from recommended sources actual economic investments and connected the investments to the alternative energy retirement funds.Aligning with the macroeconomic prediction scenario, the student completed a partial review of recent fiscal policy initiatives investing in alternative energy and clearly identifies the impacts of leveraging public sector investment with private sector ventures. The review should have reported from recommended sources actual economic investments and connected the investments to the alternative energy retirement funds.Aligning with the macroeconomic prediction scenario, the student completes a substantive review of recent fiscal policy initiatives investing in alternative energy and clearly identifies the impacts of leveraging public sector investment with private sector ventures.Macroeconomic Prediction Monetary Policy Review

28%

Aligning with the macroeconomic prediction scenario, the student did not complete a review of recent monetary policy responses. The review should have analyzed the effects of higher borrowing costs on the required rate-of-return on investments in the alternative energy ventures/projects.Aligning with the macroeconomic prediction scenario, the student failed to complete a review of recent monetary policy responses. The review should have analyzed the effects of higher borrowing costs on the required rate-of-return on investments in the alternative energy ventures/projects.Aligning with the macroeconomic prediction scenario, the student completed a partial review of recent monetary policy responses including an analyzing the effects of higher borrowing costs on the required rate-of-return on investments in the alternative energy ventures/projects.Aligning with the macroeconomic prediction scenario, the student completes a substantive review of recent monetary policy responses including an analyzing the effects of higher borrowing costs on the required rate-of-return on investments in the alternative energy ventures/projects.Macroeconomic Prediction Short-Term Forecast

12%

Aligning with the macroeconomic prediction scenario, the student did not complete a short-term forecast of at least two macroeconomic indicators (GDP growth rate, inflation rate, the unemployment rate). The forecast is should have been supported with objective supplemental forecasts from recommended or comparable sources (Congressional Budget Office, Federal Reserve Board etc.).Aligning with the macroeconomic prediction scenario, the student failed to complete a short-term forecast of at least two macroeconomic indicators (GDP growth rate, inflation rate, the unemployment rate). The forecast is should have been supported with objective supplemental forecasts from recommended or comparable sources (Congressional Budget Office, Federal Reserve Board etc.).Aligning with the macroeconomic prediction scenario, the student completed a partial short-term forecast of at least two macroeconomic indicators (GDP growth rate, inflation rate, the unemployment rate). The forecast is should have been supported with objective supplemental forecasts from recommended or comparable sources (Congressional Budget Office, Federal Reserve Board etc.).Aligning with the macroeconomic prediction scenario, the student completes a short-term forecast of at least two macroeconomic indicators (GDP growth rate, inflation rate, the unemployment rate). The forecast is supported with objective supplemental forecasts from recommended or comparable sources (Congressional Budget Office, Federal Reserve Board etc.).Writing Mechanics

4%

Writing may be plagiarized (ex: citations, quotation marks, and/or reference entries are missing where they are needed). Writing may contain an unacceptable pattern of sentence-level errors with or without plagiarism, and it may lack an academic structure.Writing may contain a moderate number of grammatical errors and/or lack clarity. APA documentation may have been minimally attempted. There are no examples of overt plagiarism.Writing may need some improvement; some sentences are confusing or contain a few grammatical errors. Some small errors in APA documentation may be present.Writing is clear with no grammatical errors and maintains an academic structure; adheres to APA format for citations and references.