Description

The world is facing a recession due to the pandemic. The Australian government and the Reserve Bank of Australia (RBA) undertook various measures to tackle the world recession.

Question 1

critically analyse the policies undertaken by the government of Australia and RBA. Also, show the impact of these policies on the following: a. Unemployment b. Inflation c. Output level

Question 2

The Australian Government introduced the Job Keeper Payment to help Australian low-income workers in jobs and support businesses affected by the significant economic impact of the COVID-19 pandemic. This payment has an implication for the Australian government's expenditure. Suppose we have the following information for our economy, all amounts are in millions of dollars. C = 800 + 0.8 Yd T0 =400 I0 = 600 G = 1,000 Yfe = 15,000 a. What is the current equilibrium level of income in this economy?

b. Calculate the size of the output gap. Draw an AE diagram illustrating the current economic situation (3 marks).

c. Suppose the government wants to close the output gap by changing government spending (via Job Keepers Payment). How much does government spending need to increase/decrease for the economy to achieve full employment?

d. Now, suppose the government decides to close the output gap by changing taxes. By how much do taxes need to increase/decrease for the economy to achieve full employment?

Question 3

The Reserve Bank of Australia (RBA) made four consecutive cash rate increases in May-August 2022 in response to rising inflation. If RBA wants to alter the cash rate it will engage in open market operations.

a. Draw the flow chart step by step and draw the effect of these open market operations on the overnight money market.

b. What is the impact of changes in cash rate on other interest rates?

Note: you must provide the correct citation and reference for authentic sources used in evaluating the SBR reporting in Australia. Additional instruction: The research must be presented with a Reference List at the end of the paper. Answer all the parts of questions with economics diagrams and must have two thousand words.