Principles of Economics XXXXXXXXXX)(Sydney city campus 2020 Session 2)Short-answer Assignment (20%...

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Principles of Economics XXXXXXXXXX)(Sydney city campus 2020 Session 2)Short-answer Assignment (20% of final mark)The assignment consists of four questions.  You should allocate at least half a page (or 250 words) to each answer. Maximum is 1000 words. You may refer to academic literature and textbooks to help answer the questions. You must write your answers in a Microsoft Word document and submit it online in vUWS on or before the due date. You should provide a ‘reference list’ of the literature you have used (in Harvard reference). Plagiarism is foidden and all assignments will be electronically checked for plagiarism before they are marked.  Note: Wikipedia and anonymous amateur blogs should not be used as references. For definitions and basic concepts, your first ‘port of call’ should be a textbook.1. Assuming a Keynesian perspective, explain what fiscal policy actions you would recommend in the following situations.a. The Australian economy is cuently operating at its potential level of real GDP, and then the Chinese economy enters a recession. (3 marks). The unemployment rate falls below its ‘natural’ rate such that labour costs across all industries start to rise. (3 marks)c. Rapid technological innovations increase potential real GDP. (3 marks)2. Let’s say we have the following information about an economy. Week9C : Consumption spending by households = $800 billionI : Investment spending by firms = $50 billion G : Government spending = $200 billionT : Tax revenue = $190 billionX : Export spending by foreigners = $80 billionM : Import spending by domestic residents = $70 billionmpc : marginal propensity to consume = 0.8a. What would be the cuent level of total expenditure in the economy? (1 mark). If a fall in interest rates resulted in investment expenditure increasing to $100 billion, to what level (in dollars) would real GDP rise? (2 marks)3. Evaluate the claim that the US economy can be made ‘great’ by imposing high tariffs on goods imported into the US economy. (4 marks)4. What do open market operations have to do with monetary policy? (4 marks)

Komalavalli · Accepted Answer

Question 1
a) According OECD potential real GDP is defined as the level of output that an economy can produce at a constant inflation rate. The government should follow a contractionary fiscal policy for Australia because currently the nation is operating at potential level of real GDP. The actual real GDP for Australia might be higher than the potential GDP level and suffer from excess consumer demand. This will cause an inflationary pressure in the economy, in order to maintain an inflation level Australian government should impose contractionary fiscal policies such as decreasing government spending and increasing tax rate.
Chinese Government should follow an expansionary fiscal policy, because currently the nation is operating lower than the potential level of real GDP that resulting in a recession. Economy operating below its potential real GDP level suffers from lack of consumer demand and deflation. In order to address this issue Chinese government should impose expansionary fiscal policies such as increasing government spending and decreasing tax rate.
b) Fall in the unemployment rate below its natural rate results in a boom in the economy in future. This will lead to inflationary pressure in the nation and results to affect the growth of an economy. Contractionary fiscal policies like increase in tax rates and a decrease in government spending should be implemented by the government to control have a control to increase in price in the economy.
c)   Rapid technological innovations increase potential real GDP this indicates that there will be a boom in economic business cycle, which will lead to inflationary pressure in the nation. Contractionary fiscal policies like increase in tax rates and a decrease in government spending should be implemented by the government to control have a control on economic growth.
Question 2
	Given:
C : Consumption spending by households = $800 billion
I : Investment spending by firms = $50 billion 
G : Government spending = $200 billion
T : Tax revenue = $190 billion
X :

Principles of Economics XXXXXXXXXX) (Sydney city campus 2020 Session 2) Short-answer Assignment (20% of final mark) The assignment consists of four questions. You should allocate at least half a page...

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