St. Paul Campus
University of Minnesota
Wednesday, January 7th, 2009
Edison, Henry, North, Roosevelt, South, Southwest and Washburn
(winning team from each topic):
What should Casey do?
Casey wants further education after high. He will choose between a 4year college and 4 year trade school. He projects expenses at $5,000 a year beyond what he has saved. The best thing for Casey to do, evaluating both personal and financial issues, (i.e., Net Present Value, risks, personal desires, projected income, etc.) is:
TEAM ONE: South/ Henry
Go to school by taking out a loan. The $20,000 he will need must be paid back after he graduates. The interest rate is (5.9%) and he will have 10 years to repay.
TEAM TWO: Southwest/Roosevelt/Edison
Work for two years at a full-time job. He can save $10,000.00 per year living at home with his parents and then he could attend school without taking out a loan and living on a tight budget.
TEAM THREE: Washburn/North
Work part-time while going to school part-time. Casey figures he could still graduate by using this method and have some financial flexibility.
Concepts: Cost benefit analysis, opportunity cost, time value of money, inflation, externalities
In 2008 the Bush administration advanced and Congress approved an Economic Stimulus Payment to 130 million taxpayers as a way to support the sagging U.S. economy. Was the policy of rebating cash to Americans an effective policy? Describe the payment structure and defend your position.
TEAM ONE: Southwest/Henry
The payment benefited the economy, a good policy.
TEAM TWO: North/Roosevelt/Edison
The payment hurt the economy, a poor policy.
TEAM THREE: South/Washburn
The payment had little effect on the economy, a neutral policy.
Concepts: inflation, redistribution, short/long term, fiscal policy, monetary policy, asset dilution, multiplier, deficit, debt, externalities
Recent turmoil in world markets shows the underlying role of banks in economic systems. What if banks fail?
TEAM ONE: North/South/Edison
Let the market sort it out allowing sound banks to prevail.
TEAM TWO: Southwest/Washburn
Nationalize the banks giving government control over banking activities.
TEAM THREE: Roosevelt/Henry
Have governments be lender of last resort until market restructuring is complete.
Concepts: money creation, multiplier, how money circulates, moral hazard, risk, government regulation, consumer confidence, insurance, economic stability, externalities.