Assignment Task

Answer four (4) questions. Maximum of 400 words for each question. These are questions which require short answer responses to a series of issues relating to economic principles and concepts. Attempt to answer each question in full and directly.

Question 1: The government wants to introduce programs to make sure that citizens can afford adequate and affordable housing. It is considering a report that proposes four ways of pursuing that goal:

(i) Passing a law requiring that all rent be cut by one forth.

(ii) A subsidy to all home builders.

(iii) Providing a subsidy directly to the renters equal to one-fourth of the rent they pay.

(iv) A grant to the first home buyer.

Predict what effect each of these proposals would have of the price and quantity of housing (rental/owner occupied) in the short run and in the long run?

Question 2:

Part A: Explain the impact of the following on the Australian GDP (Gross Domestic Product). In your answer, you need to mention which component of GDP is mostly affected:

(i) Demise of the mining boom.

(ii) A significant decrease in Business Tax.

(iii) Sharp economic downturn or a recession

Part B: "GDP is a useless measure. It is not able to do the job that it is intended for" Critically evaluate this statement.

Question 3: "Australia joining low inflation world" Read the article in: http://www.abc.net.au/news/2016-04-29/australia-joining-low-inflation-world/7372032

(i) Explain the reasons for low inflation in Australia in the recent past. (Do not copy and paste from the article, write in your own words, word limit: strictly 250 or less.).

(ii) Do your own (web or otherwise) research and explain a possible relationship between Inflation and unemployment (up to 150 words).

Question 4: (i) Explain the trends and relationships between Inflation, Unemployment and Real GDP growth using a Business Cycle.

(ii) "The Australian government is considering measures to grant significant tax rebates to big entrepreneurs/Companies that are spending big dollars on Research & Development (R&D)".

Analyse the possible impact of this measure on the Australian GDP. Use a suitable diagram/model framework (preferably AD - AS model) to explain your answer.

(iii) Suppose that the government is proposing to spend 5 billion in the next budget to improve and extend the national broadband network including a better mobile phone coverage to regional Australia. Explain the short-run and long-run impact of this proposal on the economy using the AD-AS model framework.

Word Count- 1600.