What RBA could do to keep inflation at its target rate

Reference no: EM131966672 , Length: word count:1000

Assignment -

Part A - Macroeconomics of open economics

Question: US Federal Reserve has increased interest rate once this year and is planning to increase two more times by the end of this year. Please discuss how it will affect Australia in the short and long run, and what RBA could do to keep inflation at its target rate.

Question needs to be like an essay and must have an intro/body/conclusion respectively.

Use Harvard style referencing and Word limit 1000 words.

Part B - National Economic Policy

Answer all three questions.

Questions

1. Suppose policymakers in a closed economy are concerned about inflation and want to increase the interest rate without changing the level of real GDP. What kind of policy mix would you recommend and how would your policy mix affect the components of GDP? Explain your answer and the adjustment processes that take place with the help of an IS-LM diagram.

2. In the short-run, the effect of an expansionary fiscal policy on the output level is very large when money demand is relatively insensitive to the changes in the interest rate. Do you agree or disagree with this statement? Why? Use appropriate diagram(s) to explain your answer.

3. Suppose an economy characterized by flexible prices and rigid nominal wage in the short-run. Using Aggregate Demand-Aggregate Supply framework, discuss the short-run and long-run effects of a decrease in money supply on the price level, real GDP, nominal wage rate and real wage rate.

Word limit is not binding. But please note that a long answer is not always a good answer.

Reference no: EM131966672

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Reviews

len1966672

5/2/2018 4:49:14 AM

Macroeconomics of open economics Question: (Word limit 1000). Use Harvard style referencing and Assignment is needed by 10th. National Economic Policy T1, Assignment-(Due: 10). This assignment is worth 20% of your overall assessment in this unit. Submission: Before commencing the assignment you must read the following notes and also at the end of this assignment.

len1966672

5/2/2018 4:49:08 AM

Answer all three of the following questions. You must not scan diagram from the textbook or any printed source, or copy from any electronic source. You must draw it. You can scan your own drawing, if required. Word limit is not binding. But please note that a long answer is not always a good answer; a good answer is concise and to the point. You must also read the following sections in the Unit Outline. Use Harvard style referencing.

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