BUSINESS MACROECONOMICS ASSIGNMENT 2012QUESTION ONEAustralia’s economy is currently described as a...

Question

BUSINESS MACROECONOMICS ASSIGNMENT 2012QUESTION ONEAustralia’s economy is currently described as a “multi-speed” economy.Critically discuss this. [HINT: In your discussion include what has caused this multi-speed economy; any advantages and the disadvantages for the economy and households].Limit: 2 Written Pages.[10 Marks]QUESTION TWOAustralian 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.

Document Preview:

BUSINESS MACROECONOMICS ASSIGNMENT 2012 QUESTION ONE Australia’s economy is currently described as a “multi-speed” economy. Critically discuss this. [HINT: In your discussion include what has caused this multi-speed economy; any advantages and the disadvantages for the economy and households]. Limit: 2 Written Pages.[10 Marks] 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.[2 Marks] b) Go to the Australia Bureau of Statistics site and find a chart/graph that illustrates the above statement.[3 Marks] c) Using the simple Keynesian model of Income determination, show what happens to equilibrium GDP when (as in the statement above): Consumptions falls[5 Marks] Saving rises[5 Marks] [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.[4 Marks] b) Discuss what implications (if any) the chosen article has on Australia.[1 Mark] [HINT: Be completely sure that the article shows a Macroeconomic issue. Any article that discusses a Microeconomic issue will be strictly given NO marks] 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.[5 Marks] b) Using the Aggregate...

005_akxz8jk-e0atosnd.docx

David · Accepted Answer

Solution 2 
Households’ savings rate relative to the growth in GDP is increasing in Australian 
economy since mid 2000s. The savings rate was on a decline before mid of 2000s. National 
savings comprise of household savings, corporate savings and government savings. Here we are 
considering the trends in household savings relative to GDP growth. In recent years, Australia 
has witnessed a decline in consumption expenditure relative to GDP growth. There are many 
reasons for increase in savings rate after mid 2000s. Some of them are as follows: 
a)  Higher housing prices in the country is one of the major contributors to the increasing savings 
rate of households. Since mid of 2000s housing prices have been continuously rising and have 
reached to levels much above the prices before this period. Households have become skeptical 
about the rising prices and uncertainty in this sector. So they have increased their savings rate to 
ensure future security. 
Another reason for changing trends of savings and consumption expenditure since mid 2000s is 
the occurrence of Global Financial crisis in 2008. It originated in the U.S. and soon its adverse 
impacts were felt all over the world. Various adverse effects of this crisis are increasing debt 
levels of individuals. Banks were not in a position to lend large amounts and borrowers were not 
in a position to pay back their already existing debts. The situation worsened day by day. It also 
affected the stock market prices which further deteriorated the sentiments of the individuals as 
well as the firms. Till now the uncertainty in the markets persist. Stock prices are really volatile, 
easily affected by changes in the external environment. All this has led to increase in savings rate 
in Australia.  
Recently, superannuation in Australia has become compulsory. This is also a reason for increase 
in savings rate and fall in consumption expenditure relative to GDP growth.
c)  According to the Keynesian model of income determination, when consumption expenditure    
falls then income also falls but not by the same magnitude.

BUSINESS MACROECONOMICS ASSIGNMENT 2012QUESTION ONEAustralia’s economy is currently described as a “multi-speed” economy.Critically discuss this. [HINT: In your discussion include what has caused this...

Answer To: BUSINESS MACROECONOMICS ASSIGNMENT 2012QUESTION ONEAustralia’s economy is currently described as a...

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment