Question

The Australian economy is stagnating, and economic indicators are pointing towards recession.

As the Economic advisor to Credit Experience Pty Ltd you are required to brief other associates of the business as to what two(2) possible responses the Federal Government could adopt to arrest the current slide of the Australian Economy and their l likely impact on the Financial Services Industry.

The government could respond with two economic theories:

Neo- Keynesian or Supply-side Economics.

a.Outline the main arguments of each of these two theories.

b.According to supply-side economists how are assets valued? Refer to value theory in your response.

c.According to Keynes how are assets valued?

d.Explain how each of these responses would impact differently on the Financial Services Industry.