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Microeconomics;
Assignment
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.
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.
3. Many people find the current unemployment figures for Australia at 5.5%unbelievable. Why is
this? Why might the official statistics be inaccurate?
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?
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
6. When is monetary policy most effective? When is fiscal policy most effective?
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?
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 tw o-speed economy
what specifically are they referring to?
9.  Why  do  economists  study  economic  indicators?  What  are  some  examples  of   Leading
indicators?
10.  The  Australian  dollar  has  fallen  by  12  US  cents  in  the  last  few  months.  What  are  the
macroeconomic consequences of this currency movement?

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