The Big Short The American Comedy Drama Film (Term Paper Sample)
Essay on the film “The Big Short”
Final project Introduction to Macroeconomics
Due: December 21st, 2017 – 11:59pm
Submit as a file on NYU Classes
Instructions: Maximum 4 pages double space using Times New Roman 12pts. This assignment is worth 40 points of the final exam. Please follow the rules of citation and reference all additional work you are using as support for your ideas. A reference section should be included at the end of the essay.
Write a critical essay where you discuss how accurately the film “The Big short” explains the Great Recession from a Macroeconomic perspective. You can discuss one of the following topics:
A. Discuss how the film presents the effect of the recession on aggregate demand, and the government’s response in terms of fiscal and/or monetary policy. Do you think the government responded adequately to the crisis? What do you think could have been done differently?
B. In your opinion, why are Eisman's and Burry's warnings ignored? Is there another strategy they could have taken? Mainly: What were the implications of the Great Recession in terms of distribution of wealth in the United States and what was the impact of this on Aggregate Demand and recovery after the crisis?
C. How does the explanation in the film and your learning of Macroeconomic theory change your view of the American financial system? In your understanding, what is the root cause of the subprime crisis? Is there more than one? Explain your answer. Mainly: Do you think the financial system should adhere to a Laissez Faire type of policy or should the government have more regulations? Justify your answer.
1. About Critical Essays and how to write them:
2. An interesting review of most relevant points discussed in the film “The Big Short”:
The Big Short
The American comedy-drama film, The Big Short, directed by Adam McKay based on Michael Lewis’ book, The Big Short: Inside the Doomsday Machine, touches on the 2007-2008 financial crisis in the United States that almost brought down the economy. The essay will touch on the financial system of America based on the film’s explanation and my personal understanding of the macroeconomic theory. Generally, the macroeconomic theory comprises of the phenomena of inflation, unemployment, output and income.
Output is the total sum of everything produced and sold in a state within a specified period of time. Income is the money generated from everything produced and sold. Hence, income and output are usually related or at times equivalent and are often interchangeable. In macroeconomics, output is measured as the Gross Domestic Product or the national accounts of a country. Unemployment is the number of people without jobs that includes those retired, those pursuing education, and those discouraged from looking for a job because of the lack of job prospects. Inflation, on the other hand, is an increase in prices of commodities in an entire economy, but when they decrease it is called deflation. The central banks that control the countries’ supply of money control these changes in prices using the monetary policy. They raise interest rates and lower the amount of money circulating in the economy in case of an inflation and lower interest rates in case of a deflation.
The film, touches on the same phenomena of inflation and deflation and output and income, but in the housing market. Michael Burry, a company manager discovers that the American housing market is not stable because of the higher risk subprime loans. He predicts the collapse of the housing market and the rise of interest rates for adjustable mortgages, plus he sees an opportunity to make a profit and he grabs it. Burry shares his idea with other investors and banks, who immediately understand and accept it. He bets against the market, specifically in the mortgage backed securities by creating a default credit swap market and in the end, his fund’s value increases and he makes great profit. Michael’s idea attracts opportunists, who see this as a chance to make money.
Furthermore, banks were giving out mortgages to people who would not be able to pay them back in the end due to their low incomes, and whom in the first place should not have even taken them on (The Big Short). However, when they heard about Michael’s idea, the banks decide to turn the I Owe You mortgages into bonds and o
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