Based on your excellent education and your expertise in economics, you have been hired as an economic analyst by JA Homes (JAH), a large nationwide construction company that specializes in residential housing. Your first task is to write a briefing paper that discusses economic factors that will affect JAH’s business environment over the next few years. Your bosses will use your paper in their deliberations about how much to
expand (or contract) the firm between now and 2017. Because you are new to the firm, you want to impress your bosses with the breadth and depth of your economic knowledge and with your ability to apply your knowledge in this particular situation. Your paper will be read by your bosses: educated men and women who have only a rudimentary knowledge of economics.You’ve sketched out the following outline, which you’ll use to guide your writing. You’ve decided you might include visual representations of data where appropriate (a figure can be worth a thousand words), but it doesn’t make much sense to include graphs that illustrate economic concepts. Clear explanations are more valuable to your bosses than textbook/lecture style graphs.

In other words, PLACE YOURSELF IN THE SHOES of an economic analyst by JAH and answer all the questions below into the essay:

Intro paragraph with a recommendation: Should JAH expand or contract in the next three years? Give a brief
defense of recommendation. (The rest of the essay will build the detailed defense of the recommendation.)

• Set the stage by discussing the current state of the U.S. economy (unemployment, inflation, growth). Put today in
historical context: In what ways is the recovery to date different from recoveries following previous recessions?
• Discuss Federal Reserve policy. Interest rates are key in the housing industry, so it’s important to try to predict
what the Fed will do with interest rates in the next year or so. Take time to explain how the macroeconomy
affects Fed policy, and how Fed policy affects the macroeconomy.
• JAH builds houses for the middle classes – second, third, and fourth quintiles of the income distribution.
Distribution matters. Be sure to distinguish between trends in aggregate income and trends for the middle
classes.
• The market for houses can be captured reasonably well with a simple supply & demand model. Put predictions
for 2014-2017 in perspective by discussing the various forces that affected the market for houses starting in the
early 2000s.
• JAH hires thousands of workers, mostly skilled tradespeople, and there are rumors that the company is
considering cutting wages. Include a side note addressing asymmetric information, and how wage cuts may
affect labor markets.
• Conclude with a re-statement of the recommendation and its defense: Should JAH expand or contract in the next
three years? Why or why not?