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Mathematics & Economics
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Baby-Sitting the Economy by Paul Krugman: Summary, Explanation

Essay Instructions:

Instruction attached. Let me know if there is any question.


 


Macroeconomic and Global Institutions and Policy Assignment: Baby-Sitting the Economy Learning Objectives The written assignment will allow you to: • Apply the economics concepts learned throughout the course and • Answer real life economic questions through your project. Due Dates Please submit your assignment by January 8 th at 11:59 PM (AZ time). Assignment Overview Please read the following article: “Baby-Sitting the Economy” by Paul Krugman: http://www.slate.com/articles/business/the_dismal_science/1998/08/babysitting_the_economy.html Write an essay answering the following 5 questions. 1. Summarize the Article 2. Discuss the scrip – which of the functions of money does it have? Explain. Is there an alternative method the babysitting co-op could have implemented to make sure everyone does their fair share? 3. How did the co-op handle the recession? Which type of policy did they implement? Why do you think this solution worked while the legislation did not? 4. Krugman imagines that the co-op might have eventually allowed couples to borrow extra coupons and repay them later. Which concept that we learned in our class does this relate to the most? What does allowing for borrowing add to the economy? 5. Why did the low amount of scrip lead to a recession? Name one way the co-op might have responded that would have caused the recession to turn into a depression. Describe in a few sentences how the Great Recession is different from this recession. Copyright © Arizona Board of Regents Page 2 of 2 Evaluation Criteria and Grading Rubric Each of the 5 questions will count as 20% of the final grade for the assignment. Each question will be graded based on the following criteria: Criteria 50% Credit or less 51% to 80% Credit 81% to 100% Credit Clarity of Written Response (50%) Badly organized Organized but lack of grammatical consistency Well organized and precise language Analysis of factors that influenced the macro economic performance of co-op. (50%) Weak presentation of material with multiple errors Some errors in relating class concepts to the organization of the co-op. Almost perfect analysis of the economic institutions of the co-op. Assignment Submission Instructions Save your assignment as a (.docx or .pdf) file. Include your own name in the title of the electronic file for identification purposes, for example "SmytheMaryWrittenAssignment" and do NOT use any spaces, punctuation, or special characters in the file name. Please consider verifying the Turnitin similarity percentage following the instructions at https://help.d2l.arizona.edu/content/students-assignments-turnitincheck-your-work so you can make any adjustments before submitting your work. After completing the assignment, submit it for grading using the appropriate assignment drop box as indicated below. • Navigate to the Table of Contents -> Learning Modules -> Week 3 area of D2L. • Click on the Written Assignment drop box title. • Click on the Add a File button. • Find the file you would like to upload. If you are using the most current version of your internet browser, you can drag and drop the file into the target area of the Add a File window. You can also use the Upload button to browse for and select the file you would like to add. • Once you have selected your file(s), click the Add button in the bottom, left corner of the window. • Click on the Submit button to complete the file submission. • Upon successful assignment submission, you will receive a confirmation email. For further details on submitting assignments, please refer to the https://help.d2l.arizona.edu/content/students-assignmentssubmit website. Please note: If you make a mistake (such as leaving out part of the assignment, send the wrong files, etc.) and the Assignment tool won’t let you submit, then you must contact the instructor and describe what happened. Assignment Feedback When the instructor has graded the assignment, you will be able to view your grade and feedback comments by clicking on Assignments (in the navigation bar toward the top of the screen). For details on viewing assignment grade and feedback, please refer to the https://help.d2l.arizona.edu/content/students-assignmentssubmit#4 website.

Essay Sample Content Preview:
Baby- Sitting the Economy
Name
Institution
Date
Baby- Sitting the Economy
The Sweeneys tell the story of a babysitting company in the early 1970s. A group of people agreed to baby-sit for one other in a mutual benefit arrangement. They put in place a system that ensured everyone did their fair share. The Capitol Hill co-op decided to take one appropriate solution, that is, to issue scrip- pieces of paper equivalent to one hour of babysitting time. This led to the self-sustainment of the co-op. It then turned out that there was a small technical problem; since couples would hold reserves of coupons at any given time, the co-op needed to increase the amount of script in circulation. Consequently, the Sweeneys' co-op collected and used paid-in scrips, resulting in the number of coupons in circulation becoming low. Most couples who wanted to add to their reserves through babysitting refused to run them down by going out, leading to the opportunities for baby-sitting decreasing further; for one couple's decision to go out was another's chance to babysit. The co-op fell into recession. Due to most co-ops being lawyers, they passed a rule requiring one couple to go out at least twice a month, and ultimately, the economists predominated. More coupons were dispensed, and therefore everyone was happy. Since the co-op over-issued scrips, it led to yet another problem. To solve this problem, members were permitted to borrow extra coupons from the management whenever they needed them, and compensate with those received from subsequent babysitting. To couples from misusing this privilege, the management will impose some penalty allowing members to repay more coupons than they had borrowed. Members would hold a small number of coupons knowing that they would borrow more when the need arose. In other words, this more sophisticated co-op would have a central bank that would control drops by lowering interest rates and vise versa. The above story helps to overcome the depression in the economy and become more optimistic and resist the pull of fatalism. This story needed to be taken seriously, as it can help save the world, not just for mere amusement (Krugman np).
Question 2
The co-op used the scrip- pieces of paper to pay the babysitters, for they were equal to one hour of the babysitting-money - in the form of coupons. The payment was done fairly; members receive appropriate amounts of coupons from the babysitters. This enabled self-enforcement for each couple would do as much baby-sitting as they received in return. During the recession, more scrip-papers were handed out to boost the circulation of coupons to the babysitters hence helping the members to remain assured and strengthen the economy. Moreover, when the couples held more coupons at any given time, the amount of scrip in circulation increased to guarantee the economy was in balance.
Question 3
The Co-op responded to the recession by issuing more coupons to the members. The strategy adopted was expansionary fiscal policy, which allowed members to borrow extra coupons in time of ...
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