BUECO5903 BUSINESS ECONOMICS ASSIGNMENT PART B – MACROECONOMICS

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 Instructions:

1. This assessment contains five You are required to answer all five questions.
2. This is an individual piece of Make sure your submission is an original submission. This means it must be the creation of the person submitting it.
3. Follow Academic Integrity principles. Submissions that do not follow these principles will be
4. You are required to explain your reasoning and use diagrams where
5. The assessment is worth 50
6. Due date: Please follow the due date as published in
7. The assessment should be submitted electronically in the drop box in your Moodle

Question 1

Table 1: International comparisons of economic growth and economic wellbeing

Country name	2014	2015	2016	2017	2018	2019
Australia	2.53	2.19	2.77	2.3	2.95	2.16
Brazil	0.5	-3.55	-3.28	1.32	1.32	1.14
Canada	2.87	0.66	1	3.17	2.01	1.66
China	7.43	7.04	6.85	6.95	6.75	5.95
Germany	2.21	1.49	2.23	2.6	1.27	0.56
Hong Kong SAR, China	2.76	2.39	2.17	3.79	2.85	-1.25
India	7.41	8	8.26	7.04	6.12	4.18
Japan	0.37	1.22	0.52	2.17	0.32	0.65
Norway	1.97	1.97	1.072	2.32	1.29	1.15
Nepal	5.99	3.32	0.59	8.22	6.7	6.99
Pakistan	4.67	4.73	5.53	5.55	5.84	0.99
Singapore	3.94	2.99	3.24	4.34	3.44	0.73
United States	2.53	2.91	1.64	2.37	2.93	2.16
Vietnam	5.98	6.68	6.21	6.81	7.08	7.02
World	2.86	2.87	2.61	3.3	2.98	2.34

Yearly data from the World Bank.

 

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Go to the Australian Bureau of Statistics (ABS) website at http://abs.gov.au/. Select ‘Statistics’ and then ‘Key Economic Indicators’ (under the heading ‘Economy’) to see Australia’s GDP levels over recent months and over the past year. The ABS site also provides details about general progress indicators (GPI) and other measurements of sustainability and economic welfare.

1. Comment on the growth figures for the different countries shown in Table (2 marks)

2. What are the three key measures of economic growth and how are they calculated? (4 marks)

3. What measures (other than GDP) would you use to compare economic wellbeing among these countries? Explain your answer. (4 marks)

Question 2

During the last two decades of the twentieth century, the difference in GDP per capita among the world’s richer countries (e.g. many countries in Western Europe, the UK, Japan, the US and Australia) and the once relatively poorer Asian countries (e.g. Singapore, Hong Kong, South Korea and Taiwan, known as the ‘Asian Tigers’) narrowed significantly. More recently, other countries have emerged as economic powerhouses, such as China, India, Russia and Brazil (known as the BRIC economies). In contrast, many African countries are still struggling to improve their economies and their living standards.

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Go to the World Bank’s website, http://data.worldbank.org/, and follow the links to compare the economic growth rates among countries.

1. Using your knowledge of the determinants of long-term economic growth, discuss why you think some countries have been able to achieve growth and a new economic dominance, while others have remained poor and underdeveloped for such a long period of (4 marks)

2. Does it matter if countries achieve growth through an increase in production factors or an increase in productivity? (3 marks)

3. How would a long-term growth or development strategy based on the endogenous growth model differ from a strategy based on the Solow model of economic growth? (3 marks)

Question 3

Imagine a brother and sister who live in a capital city in one of Australia’s southern states – Adelaide, for example. They are young adults who have been registered as unemployed since they left high school a little over a year ago. They do not think there are any job prospects for them and have more or less given up looking for work. They spend most of their time sitting around at home watching television. However, they do make half-hearted attempts to look for work. For example, one afternoon each week they attend a local job club, and they are active on social media.

Now imagine a man in his fifties who had worked in the local factory in a small regional town for most of his working life. He lost his job when the factory closed down and has been unable to find any work since. He does not go out to collect his unemployment benefit because he no longer expects to find work. He tries to find useful things to do around the house to fill in his time.

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Go to the ABS website at http://www.abs.gov.au. Select ‘Statistics’, then ‘Employment and unemployment’ (under the heading ‘Labour’) and then ‘Labour Force, Australia’ for the latest unemployment rates. Next answer the questions that follow.

1. Consider the example of the young How would you classify this form of unemployment? Explain your answer. Explain how the young siblings are an example of how the unemployment rate can be overstated. (3 marks)
2. Consider the example of the man in his How would you classify this form of unemployment? Explain your answer. Explain how the older man is an example of how the unemployment rate can be understated. (3 marks)
3. Is one type of unemployment a more serious problem than the other? (4 marks)

Question 4

Economic data is important to know the real status of an economy. It provides an empirical picture of an economy’s condition. The following are economic data for Australia in 2019, 2020 and in 2021.

 

	Mar 2019	Mar 2020	Mar 2021
Unemployment rate	5.1	5.3	5.1
Inflation rate	1.3	2.2	1.1
Economic growth rate	1.9	1.4	1.1

Source: Reserve Bank of Australia 2021, ‘Statistics’. http://www.rba.gov.au/statistics (tables G1 H01 and H05).

Weblink

For discussion on Keynesian economics, go to http://economics.about.com and enter ‘Keynesian economics’ into the search field.

Go to the Australian Bureau of Statistics (ABS) website at http://www.abs.gov.au. Select ‘Statistics’, then ‘Employment and unemployment’ (under the heading ‘Labour’) and then ‘Labour Force, Australia’ for the latest unemployment and underemployment rates. Visit https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/6202.0main+features10September%202018 for more details on underemployment in Australia. Next answer the questions that follow.

1. Consider the data for 2019, 2020 and 2021 shown in the table above. Use your knowledge of the short-run AD–AS model to graph the changes in output and inflation between 2019, 2020 and (6 marks)
2. Comment on the changes in unemployment, inflation and growth between 2019, 2020 and 2021 in terms of whether they are ‘good’ for the economy or not. (2 marks)Given these data, what advice would you give the government regarding its fiscal-policy stance to address the economic problems shown in the table? Explain your (2 marks)

Question 5 Part A:

The Reserve Bank of Australia is responsible for monetary policy, the payments system and financial system stability, and for providing banking services to the banks, other financial institutions and the federal government. The RBA is also responsible for the production and issuance of Australian banknotes. Once every three years, the RBA conducts the Consumer Payments Survey (CPS). The 2019 CPS shows the increasing role of electronic payment methods rather than cash for day-to-day payments.

Visit https://www.rba.gov.au/payments-and-infrastructure/consumer-payments-survey/ to learn more details of the 2019 CPS. Then answer the question that follows.

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Go to the Reserve Bank of Australia website, http://www.rba.gov.au. Select ‘Banknotes’, to learn more details   on                      ‘production                      and         issuance        of        Australian         banknotes.’                Visit https://www.rba.gov.au/publications/bulletin/2020/mar/consumer-payment-behaviour-in- australia.html to know consumer payment behaviour.

Visit https://www.rba.gov.au/statistics/frequency/retail-payments/2021/retail-payments-0421.html to learn more details of retail payments.

Question:

What are the major findings of the 2019 CPS? (3 marks)

Part B:

Visit https://www.rba.gov.au/media-releases/2021/mr-21-09.html to read the media release about a recent decision made by the Reserve Bank of Australia (RBA) that may affect the Australian economy. Then answer the questions that follow.

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Go to the RBA webpage https://www.rba.gov.au/monetary-policy/ to read more about the monetary policy transmission mechanism.

Question:

Using your knowledge of economic theories, explain what this press release means when it states that low interest rates are acting to support borrowing and spending. Use graphs to illustrate and explain the effect of expansionary monetary policy on aggregate demand. (7 marks)

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