Macroeconomics

Submit answers to all the following questions. Be sure to explain your reasoning clearly and fully and use diagrams where appropriate. The questions are applied and analytical. They can only be answered by the student having knowledge of macroeconomic principles.
Students should note that this learning task must be an individual piece of work. That is, it must be the creation of the person submitting it.

1. Consider a macroeconomy was initially at equilibrium level of real GDP. Using an aggregate demand and aggregate supply diagram or model of the economy, graphically illustrate and discuss the short-run and long-run effects of the following events upon the economy:

(a) A political election campaign is held.
(b) There is an increase in spending on infrastructure.
(c) An increase in international economic turbulence.
(d) A depreciation in the foreign exchange rate value of the economy’s currency.
(e) A fall of business confidence within the economy
(f) The country’s main exports rise in price while the goods the country imports fall in price ie its terms of trade improves in the country’ favour (3 marks)

2. Collect an article from an Australian newspaper that relates to the current Australian macro economy. 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 (1 mark)

3. Many people find the current unemployment figures for Australia at 5.5% unbelievable. Why is this? Why might the official statistics be inaccurate? (1 mark)

4. Using the simple Keynesian model to assess the implications for equilibrium GDP and the level of savings of an increase in the savings function. 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:

-economic contraction and economic expansion.
-between appreciation and depreciation
– between the balance of payments deficit and the budget deficit
-between the bond rate and interest rate (2 marks)

6. When 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 have grown up never experiencing a recession. What are the macroeconomic dangers now facing Australia? When commentators suggest that the Australian economy is a two -speed economy what specifically are they referring to? (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 few months. What are the macroeconomic consequences of this currency movement?