Attached please find my exam submission with graphs. My apologies for the late graph submission — by way of explaining, I’ve applied the IS-LM-FE framework to my own experience over the past couple of days as follows:
Assume that the Bee family is the closed ecosystem we’re considering. There are three workers in this ecosystem: me, my husband and our babysitter; sadly, unemployment (u*) is quite high — 2/5 of our family, our two children, pretty much never work. My husband is traveling this weekend, so output has already shifted slightly to the left. But that’s okay, in this ecosystem two workers can often carry the load, and my sitter had agreed to come today at 6:30am so I could get to the exam with lots of time to spare. Output (Y) is the exam.
Yesterday evening, I learned that we would have to evacuate our Battery Park City apartment sometime today in anticipation of Hurricane Irene, and that transit would close in the early afternoon. Since we had the exam this morning, I packed our bags, put the baby in the carrier, my laptop in a backpack, and wheeled the rest of our necessary possessions in the stroller to my mother’s house in Brooklyn. This had a fairly dramatic effect on the FE line in our family, since it was a shock both to K, capital (not in our own apartment), and to A, productivity (one of the two workers remaining was very tired on arrival in Brooklyn).
In our ecosystem we consume a unique bundle of goods, including special books, music, blankets and toys. Many of these are related to an important commodity that really has no equivalent outside of this ecosystem: sleep. Unfortunately our consumption dropped considerably because we were unable to take some of these items with us. In addition, prices increased considerably for other goods we consumed — for example, the cost of dinner was answering questions from my mother like: ‘Why are you getting an MBA again?’, ‘I gave the baby a Hershey bar. That’s okay, right?’ and ‘When are you getting your stuff out of the basement?’
The IS line in our family shifted left as consumption dropped. Sleep was also seriously affected, resulting in yet more loss of total factor productivity (TFP) and further shift to the left of the FE line.
At 5:30 this morning my sitter called to say that she would not be able to come since transportation was likely to shut down and she was (appropriately) concerned about being with her family. The FE line took another hit, as we lost one of our key workers. My mother, who is a hospital administrator, was called to work to launch their emergency effort. I was left alone with the baby, who, despite my best efforts, did not sleep.
Perhaps equally jarring to the ecosystem: the black gold that fuels our economy, coffee, was found to be absent. Apply the oil shock example covered in class; significant loss of TFP.
At this point, let’s assume the FE line shifts by a lot because not only is there no childcare, but the worker remaining is showing some signs of dementia. She believes that she can still take her macroeconomics exam while the baby naps. This is clearly crazy. The baby cried throughout the first hour of the exam, further affecting TFP.
At noon, my mother returned and took the baby for a while, shifting the FE curve slightly to the right with the addition of temporary help. However, she left again at 2pm, plunging the FE line back to the left.
The effect of all of this was a recessionary effect on Y, output. I suspect this will be evident when you grade my exam, which is one of my weaker efforts, and it is why the graphs are late. Thanks so much for your understanding.
The Mama Bee