marceconomic

Assignment 2: Scenario Analysis and Modelling

Weight: 20%

Assignment due date: 15 May (9am)

Feedback mode: 

Feedback will be provided using Turnitin's inline marking tool and general comments.

Assessment Declaration:

This is an individual assignment. That means it must be your own work and you can’t copy or get help from anyone. However, it is fine to discuss the issues, ideas and how you may approach the questions with fellow students.

By submitting this assessment you are declaring that you have read, understood and agree to the content and expectations of the Assessment declaration.

 (Links to an external site.)

Links to an external site.

Assignment Details and Requirements:

Assignments must be submitted electronically via Canvas and must constitute your own work (they are not group assignments). Submission for this assignment is via Turnitin.

If assignments are late then marks will be deducted at 2 mark per day (as per the course guide). Of course, if you have encountered some trouble and have been unable to meet the deadline then please apply for Special Consideration. This webpage provides instructions about how to go about this: http://www1.rmit.edu.au/students/specialconsideration

 (Links to an external site.)

Links to an external site.

.

Answers and diagrams are to be in entered into the word document provided.

Details: 

The assignment consists of problems based on a scenario analysis. 

Your answers must be provided in the word document attached; under each of the corresponding sections in the word document.  Where mathematical calculations are required you must state the equation used as well as each step in your calculations. Marks are allocated to this process - please see the rubric. Where diagrams are required, they must be fully labelled - all axis, lines, intercepts, equilibrium positions, etc....

For required diagrams you can either draw directly in the word document using 'shapes' and 'text boxes' for labelling or you can draw the diagram free-hand on paper, take a photo and paste into the word document.

Assignment Document:

Assignment 2.docx

PROBLEM

Using the Sep-2018 GDP data from assignment 1, determine the following assuming that the MPS is 0.3, the marginal tax rate is 0.05, autonomous taxes are $70,140.1 million and nx(m) is 0.04.

Furthermore, assume that 'Gross Fixed Capital Formation' represents planned investment while 'changes in inventories' represents unplanned investment..

Part (a)

Calculate actual GDP for Sep-2018 (solve to one decimal point).

Part (b)

Calculate autonomous consumption (solve to one decimal point).

Part (c)

Calculate autonomous imports (solve to one decimal point).

Part (d)

Calculate autonomous net exports (solve to one decimal point).

Part (e)

Calculate the expenditure and tax multipliers for the economy (solve to two decimal points).

Part (f)

Calculate equilibrium GDP for Sep-2018 (solve to one decimal point).

Part (g)

If the government wants to close the GDP gap, calculate the change in spending (specify whether an increase or decrease) that would have to be undertaken (solve to one decimal point).

Part (h)

If the central bank moves to close the GDP gap instead of the government, illustrate the effect of the policy action on the economy using both the AD-AS model and the IS-LM model. (Ensure you clearly display the original equilibrium position on each diagram as A and the new equilibrium position as B after the policy action).

As a result of the policy action, what will be the impact on:

1 economic activity

2 the unemployment rate

3 the price level

4 interest rates

Part (i)

Briefly explain the potential benefits of using monetary policy rather than fiscal policy to stabilise the economy (200 word limit).

Part (j)

Imagine that the trade war between the US and China escalates, and spreads to other nations, including Australia. Discuss the potential costs and benefits for the Australian economy (200 word limit).