Writing Prompt: By late 2009, Greece’s national debt had grown so large relative to the size of its economy that lenders had lost confidence in the Greek government’s capacity to service it. Fear of a Greek default led to contagion – Spain, Italy, Portugal, and Ireland were all subject to the disapproving glare of frightened lenders. The crisis caused seismic disruption in Europe and the rest of the world. The International Monetary Fund, the European Commission, and the European Central Bank reluctantly offered Greece bail-out loans – but with strings attached. In order to get the money, Greece had to agree to austerity measures. In this context, austerity means tight fiscal policy – that is, higher taxes and/or lower government spending in order to shrink Greece’s annual budget deficit. Using your knowledge of the impact of the government’s budget on the equilibrium level of real GDP, and your understanding of the effect of the economy on the state of the government’s budget, explain why austerity measures usually result in less improvement in the government’s budget position than policymakers had hoped for. Be sure to define what we mean by ‘the government’s budget.’ Grading Rubric: The table below shows the criteria your essay will be judged against. I expect two to three paragraphs, double-spaced. Your essay will be assessed as either ‘Meets expectations’ or ‘Needs improvement’ on each of the criteria in the table below. If your essay meets expectations on 1 of the two criteria, your score will be 50%, et cetera. After receiving feedback from Smarthinking, you have up to a week to revise and re-submit the essay to Smarthinking for another try – but you only get one second chance on each writing assignment. If you don’t get an acceptable score, even after revising and resubmitting this assignment, you can still rescue your writing assignment average by doing well on the next assignment. I will take the average of your three highest writing assignment scores to compute your writing assignment average. Criterion Needs improvement Meets expectations Writing The writing is difficult to follow and/or poorly organized. Transition sentences are ab- sent or ineffective. Typos and/or grammatical errors distract the reader. Ideas are well-organized. Transition sentences effectively connect one idea to the next. The essay is free of typos and grammatical errors. Application of economic analysis The impact of the government’s budget on the economy is not clearly articulated, or is incorrectly analyzed. The impact of the government’s budget on the economy is correctly identified and explained. The effect of the state of the economy on the government’s budget is not clearly articulated, or is incorrectly analyzed. The effect of the state of the economy on the government’s budget is clearly articulated, and correctly analyzed. The reasons why austerity measures usually result in disappointing improvement in the government’s budget is not explained. The reasons why austerity measures usually result in disappointing improvement in the government’s budget are clearly explained.