Reference no: EM132137663

Case Study

Objectives

This assessment item relates to course learning outcomes 1 and 4 as listed in the unit profile.

Task description: In this task, you will build a case study based on the article: RBA decision 7th August 2018, provided on page 3 of this task sheet (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 rubric is posted on the Moodle site, which can help you understand what is required to reach your desired level of achievement.

Note: You will have to do research for this assignment to find some secondary data, tables and graphs from the ABS and RBA websites related to GDP, unemployment, inflation, exchange rates, interest rates and their impact on consumption demand, commodity prices, business investment and the 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 for theory. You also need to refer to other on-line articles 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 7-Aug-2018 on pages 3-4 of this task sheet.

3. Look at the guiding questions on pages 4-5 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 for your case study. Your assignment should have an introduction paragraph regarding the RBA case and applying theory to real life economics respond to the five (5) questions within

Five (5) body paragraphs. Be sure to connect the paragraphs with tables and graphs and have a final concluding paragraph.

6. Be sure you fully respond to each of the guiding questions, which are provided to give you direction when writing and building the case study.

7. Drawing on your research and notes about RBA decision 7-August-2018, apply the DADA framework while answering each of 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 and correctly labelled, explaining the relationships they depict.
d. Analysis overall should be provided by relating economic theory to how interest rate decisions are made and their impact on real-life economics.

8. Review your draft case study against the marking rubric (located in the assessment section of the Moodle site) 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 rates 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.

Introduction: Provide an introduction about the case.

Question 1: Why does the RBA takes into account the domestic (Australian) and global
(China, Japan, and USA) macroeconomic indicators (GDP growth rate, investment, household consumption, inflation, unemployment, and exchange rate) when making a decision whether to change (increase or decrease) or keep the official cash rate unchanged? Explain.

Question 2: Explain the main objectives of monetary policy. List and describe the main functions of money and the Reserve Bank of Australia.

Question 3: On 7-August-2018, the Governor of the RBA, Dr Philip Lowe, decided to leave the official cash rate unchanged at 1.50 percent as house prices continue to fall. Why did the RBA keep the cash rate unchanged for the last 2 years? Justify your answer with reasons and evidence. (Note: information found in detail monthly minutes of RBA)

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. In particular, discuss the effect on household consumption, business investment, GDP, inflation and housing market. Describe the circumstances in which the RBA Board might increase the cash rate.

Note: Use GDP, inflation, unemployment, fiscal deficit, and housing market data can be obtained from the Australian Bureau of Statistics and RBA websites for the last 5 years to see the trends, when answering this question.

Question 5: Define economic growth. What are the determinants of long-run economic growth? Is the historically low interest rate of 1.50 percent (from August 2016 until the August 2018) sustainable to achieve long-run 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.

Attachment:- Case Study.rar