代写ECON5102 MACROECONOMICS Term 1, 2024 ASSIGNMENT 2代做迭代

ECON5102

MACROECONOMICS

Term 1, 2024

ASSIGNMENT 2

DUE: 5pm Friday, 29th of March 2024

Academic Honesty

Academic honesty is a core value of the University, and all students are required to act honestly, ethically and with integrity. The consequences of engaging in plagiarism and academic dishonesty, along with the process by which they are determined and applied, are set out in theStudent Misconduct Procedure. Under the same policy, as the lecturer, I must report any suspected plagiarism or academic dishonesty.

Instructions

•   This is an individual assignment which accounts for 10% of your final grade. You may  discuss with your classmates, but please ensure that the submitted work is independent.

•   You can either hand-write or type your answers (or both), but please compile all your

answers in one PDF file and submit it via Moodle (failure to submit a PDF file will incur into a 1-mark deduction). You can only submit your work once, so please double check before you submit. The page limit of the submission is 10 pages including appendix (a penalty will apply if the page limit is exceeded).

•   There are 4 questions (with sub-questions) in this assignment, and please attempt all

questions. Detailed solutions to each question will be provided during seminars after the assignment is due.

•   I will randomly select 4 sub-questions (same 4 sub-questions for everyone) to grade, and each question is worth 2.5 points. The total point of this assignment is 10. The grading will be based on the completion and general quality of your submission.

•   For all questions, please show your derivations. Answers without intermediate steps will be considered incomplete.

•   Based on the University late policy, a late submission is subject to a penalty of 5% (of the total points) per calendar day. No submissions will be accepted after Tuesday (02/04) 6pm.

•   Make sure to include a cover sheet to your submission. They can be found on Moodle. Submissions without a signed cover sheet will incur into a 1-mark deduction.

Problem 1 - Labour Market

We will be doing some analysis with the statistics of the labour market for Australia for

January 2024. Go to the ABS website (www.abs.gov.au) and click on the unemployment rate icon on the top right of the page. Make sure to look at the reference period of January 2024

(you may want to click on “Previous releases” and choose January 2024). We will be working with the statistics on this page, so it is a good idea to have a look at it.

Answer the questions below.

1.1) What was the youth unemployment rate in January 2024? How many millions of hours did Australians work in all jobs in December 2023? How many percentage points was the underemployment rate in South Australia larger than in NSW in January 2024? Make sure to use only seasonally adjusted figures.

1.2) Download Table 1 from the very bottom of the page. Fill out the table below with the statistics from the original series (not trend or seasonally adjusted series).

Round your answers to the nearest integer and represent the values either in persons (not in thousands or millions of people) or in percentage whenever appropriate.

1.3) The graph below shows the number of workers unemployed over the last few years in Australia.

Daniel is learning Economics, and he makes the following statement: “Overall, in the last few years, the number of workers unemployed has decreased substantially. This indicates the

Australian labour market is getting stronger.”

Indicate in at most 5 sentences (about half a page) why Daniel might not be correct. Feel free to include statistics to support your statement.

1.4) Define underemployment rate and contrast it to the (1) unemployment rate and (2) underutilisation rate. Keep your answer 3 sentences.

Problem 2 - Inflation

The table below shows quarterly CPI data for Sydney over the few years.

2.1) Calculate the quarterly inflation rates. Use two decimal places.

2.2) Calculate the annual inflation rates. Use two decimal places.

Briefly comment on whether the RBA has been successful in maintaining its mandate on inflation (you might need to do some research on what the RBA tries to achieve regarding inflation for the country – assume this is also true for Sydney). Keep your comment to at   most 3 sentences.

2.3) Calculate the accumulated inflation rate from Q4 2021 until Q4 2023. Then, calculate the average annual inflation rate for this period. Use two decimal places. Hint: you will only need to use two values of inflation to obtain the average over the two-year period.

Has your opinion on the RBA’s objective in part (2.2) changed? Keep your comment to at most 3 sentences.

2.4) In the December quarter of 2023, the wage price index in Australia rose 4.2%, while gross operating profits increased by 7.9%. Assume that capital costs grew in line with inflation (calculated in 2.1) and that taxes rose 1% in the same period.

If all firms are the same and they only have costs associated with capital, labour and taxes, what is the increase in prices firms will set in Q4 2023? If inflation grows at this same speed in Q1 2024, what is the CPI for Mar-2024?

Problem 3 - Inflation

3.1) In the short run, changes to the money supply have important consequences to economic activity (real GDP). What concept states that this relationship is not present in the long run?   Explain what this concept is in at most 3.

3.2) Hugh – a student from ECON5102 – doesn’t knowhow to show that we can go from the monetary equation in levels (MV = PY) to the monetary equation in changes. Show Hugh how we can mathematically derive the equation in changes.

3.3) Indicate the three ways governments can raise money to finance spending. Discuss which one is typically used the least and why, if used intensively, it can lead to hyperinflation. You may use the quantity theory to illustrate your argument and make all necessary assumptions. Discuss in at most 4 sentences.

Problem 4 – Short Term

Let’s propose an IS curve with the automatic fiscal stabiliser effect discussed in lectures. The equations describing the dynamics of the demand components are given by:

Where Tt  represents net taxes in this economy.

4.1) Explain why it would make sense for the investment equation to also be a function of the output gap. Use at most 3 sentences.

4.2) Briefly explain the idea of automatic fiscal stabilisers. It might help if you provide an example. Which parameter(s) in the equations above measures this effect? Keep your answer to at most 5 sentences (half a page).

4.3) Derive the IS curve. Show the process step by step and indicate what the slope of the curve is. Is this slope greater, smaller or the same as the case we analysed in lectures (slide 34 of “The Short Run and the IS Curve” file). Explain.

4.4) Compare the case you derived above to the case when we do not have the automatic fiscal stabiliser (set the parameter(s) you indicated in 4.2 equal to zero). To make this comparison, show how the slope of the IS curve changes (increased, decreased or stayed the same).

4.5) On a clear diagram, draw the two IS curves1  from 4.4, along with an MP curve. Start from a position of equilibrium (no demand shocks and Rt   = ) and assume the monetary authority successfully lowers the real interest rate.

Show the effects of this expansionary monetary policy on the output gap (yt(~)) of both economies and explain (using economic intuition,i.e. no equations or graphs; just simple  words) why one of the economies has a stronger effect on output gap than the other. Keep your explanation to 5 sentences (half a page).