RECENT ASSIGNMENT

1. Consider a macroeconomy was initially at equilibrium level. Using the Short Run aggregate demand and aggregate supply model graphically illustrate and discuss the short-run of the following events upon economic activity:

(a) The central bank cuts interest rates
(b) There is an increase in spending on infrastructure by the Government.
(c) An increase in international economic turbulence.
(d) An appreciation in the foreign exchange rate value of the economy’s currency. (2 marks)

2. Collect an article from an Australian newspaper that relates to the current Australian macro economy or a macroeconomic issue or problem. In a paragraph indicate which section of the course it applies to, why you selected the article and provide a brief summary of what the article is actually about (2.5 marks)

3. Many people find the current inflation figures for Australia are unbelievable especially when many complain about he rising cost of living. Why might the official statistics be inaccurate? (1 mark)

4. What would happen to GDP if people decide to save more out of their current income? What eventually happens to the level of savings? What would happen to equilibrium income if there is a sustained rise in private investment spending? (2 Marks)


5. State the difference between:

- an economic contraction and economic expansion.
-between appreciation and depreciation
- between the trade deficit and the budget deficit
(1.5 marks)

6. Under what economic circumstances is monetary policy most effective? When is fiscal policy most effective (2 marks)

7. Distinguish between ongoing demand pull and ongoing cost push inflation. Carefully draw them. Why might it be difficult to establish the extent to which a given rate of inflation is either demand pull or cost push? (2 marks)

8. The Australian economy has gone nearly 22 years without a recession meaning a whole generation of Australians have grown up never experiencing a recession or mass unemployment. How has Australia achieved this? Was it luck, good economic management or some other factor? (2 marks)

9. Why do economists study economic indicators? What are some examples of Leading indicators?(2 marks)

10. The Australian dollar has fallen by 12 US cents in the last year. What are the macroeconomic consequences, or benefits and costs, of this currency movement? (3 marks)

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