MAE203 The Global Economy

Questions:

Q1a. On 4^th Feb 2020, RBA made the following announcement: “At its meeting today, the Board decided to leave the cash rate unchanged at 0.75 per cent.”

https://www.rba.gov.au/media-releases/2020/mr-20-01.html

Using the Statistical Tables on the RBA website, find data on monthly Money Market interest rates. (In Column B of the relevant spreadsheet you’ll find data on the Cash Rate Target: monthly average, starting from August 1990 to January 2020).

Use this data to construct a graph of the monthly cash rate from August 1994 to January 2020. Use the graphing tool (line charts) in Excel. Please describe interest rate changes over this period, in particular the big drops, and briefly discuss the reason of the big drops.

Q1b. Please briefly discuss the relationship between inflation rate and unemployment rate over the period 1980-2019, by collecting data from the Australian Bureau of Statistics website. In particular, you can find unemployment and inflation rates from the following statistical series:

6202.0 Labour Force, Australia, and then select Table 1. Labour force status by Sex, Australia - Trend, Seasonally adjusted and Original. From here download the following series: Unemployment rate, Persons; Seasonally adjusted, for the years 1980 – 2019 in monthly frequency.

6401.0 Consumer Price Index, Australia, and then select

TABLES 1 and 2. CPI: All Groups, Index Numbers and Percentage Changes. From here, download the following series:

Percentage Change from Previous Period ; All groups CPI ; Australia ; Original, for the years 1980 – 2019 in quarterly frequency.

Now present the data for unemployment rate and inflation rates in a graph. From the graph, discuss the relationship between inflation rate and unemployment rate over these years.

Note that converting the monthly data into quarterly frequency is by taking only the monthly values corresponding to each quarter like, for example: take the data for March 1980, June 1980, September 1980 and December 1980 to get the quarterly series in 1980.

Q2. Because of Coronavirus outbreak, Australian economy was influenced heavily. Please use the Aggregate Expenditure function and the 45-degree line diagram to explain how the Coronavirus outbreak could affect Australian economy.

Q3. From Sep 2019 till Feb 2020, Australia experienced serious bushfires around the country. Please use aggregate supply and aggregate demand curves to analyze the impact of bushfire on the Australian economy and discuss what policies the government should use to stimulate the economy and its impact in the short and long run.

Learning Outcome

1. Understand, describe and apply key macroeconomic concepts in a global context.

2. Obtain, present graphically and interpret data for macroeconomic variables.

3. Understand the opportunities for economists in a global context