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ECON1007 MACROECONOMICS STUDY PERIOD 5, 2017. Internal and External students Written ASSIGNMENT Due date: 8 th October XXXXXXXXXXpm) 2 Econ1007 Macroeconomics Assignment SP5 2017 ASSIGNMENT TOPIC...

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ECON1007 MACROECONOMICS STUDY PERIOD 5, 2017. Internal and External students Written ASSIGNMENT Due date: 8 th October XXXXXXXXXXpm) 2 Econ1007 Macroeconomics Assignment SP5 2017 ASSIGNMENT TOPIC Assignment 2 Written assignment Weighting: 25% Length Word limit: XXXXXXXXXXwords in total (including diagrams, references and all text) Due Date: Sunday 8 th October XXXXXXXXXXpm Topic Read the news article below and answer all questions. Job upswing shows RBA on target: board member Greber, Jacob. The Australian Financial Review; Melbourne 17 June 2017 The nation's labour market is close to the point when workers, who are keen for jobs or more work, are absorbed into a strengthening economy, stoking the wage inflation that is a key precondition for future interest rate hikes, said Reserve Bank of Australia board member Ian Harper. While there is still no need to "rush" the normalisation of monetary policy towards higher official interest rates, Professor Harper expressed growing confidence the economy was "on a steady track towards a recovery" forecast by the central bank and Treasury. Professor Harper described this week's jobs numbers - which showed the jobless rate had fallen to a four-year-low of 5.5 per cent - as a sign that the labour market's "excess capacity is beginning to wear off".
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Q1 the model is needed a) 250 words b) 250 words Q2 no model needed 400 words Q3 the model is needed 500 words Important to note re the assignment: Make sure to use model asked by question – i.e. AE model; static AD-AS model and dynamic AD-AS model No need to understand mechanics of how R/B influences interest rates – just if interest rates change how does it affect AD curve Important to understand short-run (Ye = SRAS) and long run equilibrium (Ye = SRAS = LRAS) Understand if: Ye > Yp (or Ye’ > Yp’) - inflationary environment Ye <><>

005_s47ba5o-gq0etou5.docx 005_ba5o-4u3si5tz.pdf
Answered Same Day Dec 27, 2021

Solution

Robert answered on Dec 27 2021
108 Votes
1)
a) Aggregate expenditure (AD/AE) is defined as the total expenditure on all final goods and services by the
economy as a whole at a certain price level. An aggregate expenditure model (AE model) is based on the
concept of planned aggregate expenditure which has four parts domestic consumption, government expenditure,
investment expenditure and net exports. In an aggregate expenditure model (AE model) equili
ium is achieved
when planned spending equal the value of real output. This happens when business houses are spending more
than they are making. There are no unnatural changes in inventories. There is no incentive to contract or expand
on producers. We can put Keynesian equili
ium as
Real Output = Planned [C + I + G +NX]
If an economy is on an improving pathway boosted by rising business investment and strong export growth”,
then equili
ium output will rise this is because during this phase the expectations of producers and buyers will
not match each other. An increase in business investment and strong export growth will increase planned
aggregate expenditure well above the present level of output which will ultimately lead to a fall in inventories.
In such a scenario, firms will try to expand their production to get their inventories back to a normal level.
Therefore, equili
ium output will expand to the point planned expenditure equal cu
ent output. The idea of
aggregate expenditure model (AE model) is there will be a tendency for real output to expand or fall whenever
planned expenditure is not equal to real output.
) The statement, "but the strengthening in full-time employment is much more indicative than earlier indicators
that excess capacity is beginning to wear off” means that job market is improving and the economy is expanding
even when in the past it looks like the planned expenditure is falling or might fall in future but that is not true
ather there is an increase in demand for planned expenditure which is strengthening the full-time employment
need. The statement is reflecting the fact that in past, planned expenditure was falling behind real output and
given the aggregate expenditure model (AE model) achieve equili
ium at planned expenditure = real output
there was tendency on the real output to fall but the recent scenario shows full time employment is increasing
which means that firms are actually...
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