QUESTION ONE

Australia's economy is currently described as a "multi-speed" economy.

Critically discuss this.

QUESTION TWO

Australian households have changed their spending behaviour since the mid 2000s, illustrated by Consumption falling as a share of GDP and the Savings ratio rising.

a) Discuss two possible reasons for this.

b) Go to the Australia Bureau of Statistics site and find a chart/graph that illustrates the above statement.

c) Using the simple Keynesian model of Income determination, show what happens to equilibrium GDP when (as in the statement above):

• Consumptions falls
• Saving rises

[HINT: Use two separate diagrams to show each. Explain these diagrams in words as well. Explain the operation of the multiplier effect in each instance.]

QUESTION THREE

Collect a 2011/2012 article from an Australian newspaper showing coverage of a MACROeconomic issue relating to China or India. Include a hard copy of the article with your answer.

a) Explain what macroeconomic topic the article addresses and summarise the article briefly to show your understanding.

b) Discuss what implications (if any) the chosen article has on Australia.

QUESTION FOUR

The Australian Dollar has been performing particularly strongly against the United States Dollar for the first quarter of 2012. This appreciation of the Australian Dollar to the US Dollar has not been seen since the early 1970s. See chart below.

a) What effect does this have on the Economy? Explain in words only.

b) Using the Aggregate Demand-Aggregate Supply Model (a diagram is required), show the impact of a high domestic exchange rate on GDP and Inflation.