Answer all five (5) of the following questions.

References are only required for Question 5.

1. Does a market-based economic system need to be monitored or is a market system basically self-stabilising?

2. Currently Australian consumers are paying off their debts and not spending. Using the simple Keynesian model to assess the implications for equilibrium GDP and the level of savings of an increase in the savings function.

Conversely what would happen to equilibrium income if there is a sustained rise in private investment spending?

3. Assuming that the money market is initially in equilibrium, trace through the effects of a rise in the money supply on the money market on the interest rate and also on output, employment and the price level.

4. Why is a depreciation of a country currency not necessarily a bad thing?

Why is a country's appreciation of its currency not necessarily a good thing?

5. The Australian dollar has depreciated markedly recently, what has caused the depreciation? Why does the Reserve Bank of Australia want it to depreciate even further?