Explain the relationship between inflation and unemployment

Reference no: EM131968909

Assignment

Task

Question 1

Using data from the Australian Bureau of Statistics (ABS) collect information on unemployment and inflation rates for Australia over the period 2001 to 2016, inclusive. Employ annual data. Be explicit and define and provide sources for the data obtained.

Plot on a single diagram the relationship between inflation and unemployment, measuring inflation on the vertical axis and unemployment on the horizontal axis. Comment on whether any relationship exists between these variables and any implications of your findings.

Question 2

Employ the aggregate demand and supply model for the Australian economy, to analyse the consequences for real GDP and the general price level of the following scenarios. Confine your analysis to the use of short-run AD/AS curves. In your response clearly state your assumptions and illustrate your answers with diagrams.

(a) India has placed a 30% tariff on chickpea exports from Australia,
(b) The demand for Australian wine in China has substantially increased,
(c) The federal government plans to spend approximately $5 billion on Snowy Hydro 2.0 to generate more electricity power capacity,
(d) The price of oil, a product Australia primarily imports, fall substantially,
(e) An increase in the immigration intake substantially increases the Australian labour force.

Rationale

The question addresses the following learning outcome:

• be able to examine critically the health of the economy as a whole through the analysis of major economic variables and advise on likely policy alternatives.

Reference no: EM131968909

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