Assume you have been hired as an economic analyst by the government. In your role you are required to produce an appendix to the state of the nation report to government ministers. This report must address each of the sections below. As this is a report, you must NOT paste the "questions/requirements" in the report - just you answers and diagrams.
Answers and diagrams are to be in entered into the Word document provided under the relevant section headings. For required diagrams you can either draw directly in the word document using 'shapes' and 'text boxes' for labelling (please remember to 'group' all your diagram items as they are likely to move on in your document - especially when you upload the word file and you will lose marks if we cannot 'see' it properly - OR you can draw the diagram free-hand on paper, take a photo and paste into the Word document. Do not copy and paste diagrams out of textbooks, web pages, provided lecture slides....... This must represent your own work.
Remember that this is part of a report for ministers in government therefore your writing and expression should be professional and succinct (these are very busy people). Your wording needs to be structured as a report not as an answer to questions in a test.
Be sure to observe word limit requirements and provide well crafted answers that provide adequate information and explanation without being either too brief (insufficient detail) or too long (long winded).
Your answers must be provided under the 3 sections provided in the Word document and address each of the following components: Australia Technical Appendix.docx
Details:
Consider the current covid-19 situation and its negative impact on economic activity.
Section 1: COVID-19 Impact [300 word maximum]
Using the (1) Aggregate Demand-Aggregate Supply Model with the Labour Market Model and the (2) Aggregate Expenditure (AE) Model with the Labour Market Model and assuming the Australian economy was at the natural rate of output at the onset of the crisis:
Illustrate the impact of the crisis on the domestic economy using both the (1) AD-AS model and its associated labour market model and the (2) AE model and its associated labour market model. Ensure you clearly label all parts of the diagram, clearly demonstrating the original equilibriums and the COVID-19 outcomes.
Discuss your rationale for the outcome you have demonstrated in your diagrams, ie discuss which components of AD/AS/AE have been affected and why - the basis of the shifts you demonstrated in the diagrams. Explain what has occurred in your labour market models and why.
Section 2: Model Assumptions and Resultant Outcomes [200 word maximum]
The 2 models you have used have different underlying assumptions.
Outline the major underlying difference(s) between the two models.
Briefly discuss and illustrate how the difference(s) in the model assumptions impact the degree of the potential impact on the economy. Use the AD-AS Model and provide ONE diagram to illustrate the potential difference in outcomes depending on the assumptions made. (Hint - consider the assumptions underlying the AE model - what SRAS curve reflects this?)
Section 3: Policy Recommendations [500 word maximum]
Based on the differences of the model:
Provide alternate policy recommendations for each model, the justification for the policy recommendations and any costs/benefits you perceive of these actions. Discuss whether self-correction is possible for either model - if so, what is the process. Discuss the costs and benefits of self-correction in this case relative to government intervention.