Reference no: EM131666028 , Length: word count:3000

Assessment - Paper- Case Study

Task description: In this task, you will build a case study based on the article: RBA decision August, 2017, provided on page 3, along with the link. Guiding questions, found on page 4 of this task sheet will help you structure your response when building the case. Do not forget to apply the DADA framework, using data and graphs to support your response. A marking sheet showing how points are awarded is found on page 5.

Note: Students will have to do some research for this assignment to find some secondary data, tables and graphs from ABS, RBA website related to GDP, unemployment, inflation, exchange rate, interest rates and its impact on consumption demand, commodity prices, business investment and housing market.

Suggested way to approach the task

1. Get a good understanding of macroeconomic objectives, unemployment, inflation, the role of money, monetary policy, interest rates, the Reserve Bank of Australia (RBA), and economic growth from course resources. Refer to relevant chapters from the set textbook and other economics textbooks. Students should refer to textbooks for theory, and other on-line article and news items related to the case study. Draw on the work you have done at home or during workshop session solving the weekly textbook boxed case studies as these will help you learn to think like an economist.

2. Read and take notes about the article RBA decision August, 2017 on page 3 of this task sheet.

3. Look at the guiding questions on page 4 of this task sheet. These will help you apply the theory to a real life monetary policy example of economics at work.

4. Conduct research (find related articles and search the RBA website) relevant to the current situation in the Australian economy and the RBA's role, function and conduct of monetary policy to keep inflation within the target rate. Find tables and graphs that show the current levels of inflation, interest rates, and money supply and the relationship between inflation, investment, GDP and interest rate, and use these to draw conclusions and justify your answers.

5. Read the How to write essays in economics guide available in the Assessment section of the Moodle site as this will help you adopt the appropriate writing style. Your assignment should have an introduction paragraph regarding the case and respond to the 5 questions located on page 4 of this task sheet within 5 body paragraphs. Be sure to connect the paragraphs with tables and graphs and have a final concluding paragraph.

6. Drawing on your research and notes about RBA decision August, 2017, apply the DADA framework while answering the questions (Definitions: define the key terms; Assumptions: list or make assumptions as required; Diagrams: draw relevant graphs/tables and explain; and original Analysis: apply the theory to real life economic examples and explain to justify your answer). Remember:

a. Concepts and key terms must be defined accurately and completely

b. The assumptions upon which the analysis is based must be stated at the outset.

c. Diagrams must be drawn properly, correctly labelled and the relations they depict explained.

d. Analysis overall should be provided by relating economic theory to how interest rate decisions are made and its impact on the real-life economic.

7. Be sure you fully respond to each of the guiding questions, which are provided to give you a direction, to write and build the case study.

8. Review your draft case study against the marking sheet (page 5) to be sure you have addressed all key criteria. Make sure you have focused on the key macroeconomic objectives and applied macroeconomic concepts and theory to the role of money, banking, inflation, interest rate and the functions of the Reserve Bank of Australia.

9. Sources must be acknowledged using APA referencing style. Make sure you include in-text references to acknowledge others' work and provide a reference list.

Suggested structure and guiding questions -

Introduction: Provide an introduction about the case.

Question 1: Explain the main objectives of monetary policy. List and describe the main functions of the Reserve Bank of Australia.

Question 2: Why does the RBA take into account the global macroeconomic indicators in major economies like China and USA, including the domestic macroeconomic indicators, when making a decision whether to change (increase or decrease) or keep the official cash rate unchanged? Explain.

Question 3: On 1st August 2017, the Governor of the RBA, Dr. Philip Lowe, decided to leave the official cash rate unchanged at 1.50 percent. Why did the RBA keep the cash rate unchanged?

Question 4: Illustrate and explain using the money market equilibrium model and monetary transmission mechanism how an increase in the cash rate from 1.5% to 2% would help to keep inflation within the target rate and how a further decrease from 1.5% to 1 % in the cash rate would help to stimulate the economy. Describe the circumstances in which the Board might increase and decrease the cash rate. Note: Use GDP, inflation, unemployment, fiscal deficit, and housing market data (which can be obtained from the Australian Bureau of Statistics and RBA websites) from the last 5 years to see the trends, including other global macroeconomic indicators of Australian trading partners when answering this question.

Question 5: What will be the effect of increasing and also further lowering the cash rate in the near future, in particular on consumption demand, business investment, GDP, inflation and housing market? Justify your answer with examples. Is the historically low interest rate of 1.50 percent (since August 2016 until June 2017) sustainable to achieve longrun economic growth? Yes/No, justify your answer with reasons. Note: Students need to give their own views supported and justified by several references and examples.

Conclusion: Provide an overarching conclusion to the case.

Reference list: Use in text citations within your paper to refer to these references.

Attachment:- Assignment File.rar