Question

1) Consider a macro economy that is initially at equilibrium level of real GDP. By using an aggregate demand and supply diagram or model of the economy, graphically exemplify and discuss the short-run and long-run effects of the given events on the economy:

• A political election campaign is held
• There is a raise in expenditure on infrastructure.
• The raise in international economic turbulence.
• The depreciation in foreign exchange rate value of the economy's currency.
• A fall of business confidence within the economy
• The country's main exports increase in price whereas the goods the country imports fall in price that is, it's terms of trade improves in the country' favor.

2) Collect the article from an Australian newspaper which relates to the current Australian macro economy. In a paragraph point out which section of the course it applies to, why you chose the article and give a brief summary of what the article is really about?

3) Many people find out the current unemployment figures for Australia at 5.5% unbelievable. Why is this? Why may the official statistics be imprecise?

4) By using the simple Keynesian model to evaluate the implications for equilibrium GDP and the level of savings of an augment in the savings function. What finally happens to the level of savings? What would occur to equilibrium income if there is a sustained increase in private investment spending?

5) Describe 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.

6) When is monetary policy most efficient? And when is the fiscal policy most efficient?

7) Differentiate between ongoing demand pull and ongoing cost push inflation. Cautiously draw them. Why might it be hard to establish the extent to which a specified rate of inflation is either demand pull or cost push?

8) Australian economy has gone about 22 years devoid of a recession meaning a whole generation has grown up never experiencing the recession. What are the macroeconomic dangers now facing Australia? When commentators propose that the Australian economy is a two-speed economy what specifically are they are referring to?

9) Why do economists study the economic indicators? What are some illustrations of leading indicators?

10) The Australian dollar has fallen by 12 US cents in last few months. What are the macroeconomic effects of this currency movement?