International Monetary Economy

School RMIT UNIVERSITY

Program name Bachelor of Business (Economics & Finance)

Course/unit name International Monetary Economics

Name of lecturer/teacher Nataliya Ilyushina

Name of tutor/marker Nataliya Ilyushina

Program code BP251

Course/unit code ECON1082

Office use only

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Assignment no. 2A(1) Due date (DD/MM/YYYY) 18/04/2021

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Class day/time Tue 15:30

Campus City

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Given name PENGFEI

Student no. S3614390

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Task – 1

US monetary policy

The economy is likely to recover in the third quarter after an unusual recovery in the second quarter due to the survey of Covid-19 (Epanchin-Niell, R. S. 2017). Unemployment fell 0.5 percent In September, from the previous month, while wage records outside France continued to rise, despite continuing to fall by 10.7 million from February. This, combined with customer safety, which peaked six months later, likely supported private consumption, as evidenced by the surge in the auto and apparel trade at the same time. In addition, the unsuccessful development movement and the flow of housing, which began in the third quarter, should support private speculation. In the interim, the Democrats are conducting opinion polls for the November 3 public elections. Under Biden, monetary policy development will almost certainly benefit from increased government and pension spending and unfamiliar exchange rate policies.

US Economic growth

By the year, GDP is set to decline as a result of significant financial and monetary improvements, as well as the fog of a pandemic. Lower unemployment and greater customer safety should support family spending throughout the year. Despite pressure on the exchange rate from the United States and China and the renewal of blockade measures, threats from the outside are key. Experts from the Center for Economics predict that the developing GDP in 2021 will amount to 3.8%, which has not changed compared to the data of the previous month. In 2022, our government recorded economic growth of 2.9% (Baldwin & Di Mauro, 2020).

US financial overview

Despite internal difficulties with a rapidly changing worldview, the US economy stays the biggest and generally significant on earth. The US economy represents about 20% of the world's supreme return, even more than China. The United States also has the sixth-largest GDP per capita (PPP), according to the International Monetary Fund. The US economy includes a densely populated and mechanically developed administrative territory, which accounts for about 80% of its income (Langpap et al., 2018). The US economy is awash with organizations housed in organizations in areas such as innovation, money management, medical services, and retail. Tremendous US affiliations likewise assume a significant part in foreign relations: more than one-fifth of the Fortune Global 500 associations come from the United States.

Task 2

Research depends on the above figures.

US balance of payments

In recent years, the US current account balance has had a strong impact on global foreign exchange flows, and the persisting imbalance between imports and exports has led to a predictable trade deficit (Oberhauser et al., 2019). Pay from US assets and speculation abroad record for a little portion of the current record equilibrium, and surplus in this class is practically lacking to adjust the immense irregular characteristics in imports and fares. Generally, the absence of financial records shows that the valuation of products and ventures purchased by US abroad is higher than the valuation of merchandise and organizations offered to outsiders. The U.S. current record deficiency has enlarged consistently since the 1990s, topping and a world record of 5.8% of GDP in 2019. The deficiency is restricted because of some increment in homegrown oil creation.

US business structure

The United States is the second biggest exporter of items and undertakings on the planet and a significant shipper of autos (Kang & Yoon, 2019)

. The United States dependably controls import/trade irregular characteristics, fundamentally because of reliance on obscure oil for its energy needs and solid homegrown interest in unfamiliar made items, or because of advances in homegrown oil creation. The energy hole is shutting. The standard of the partnered trade of the United States -, China Canada, Japan, and Mexico. Canada is the principal objective for US fares and China is the fundamental wellspring of imports.

US Export

The US has lost a portion of its huge edge throughout the long term, unmistakable merchandise really represents 66% of its absolute fares. The United States fundamentally sends out high-esteem fabricated merchandise and capital products, including progressed gear, airplanes, cars, and manufactured materials. By 2020, the United States traded "$ 1.51 trillion" in products (Phelps & Parente, 2017).

Imports by the United States

Over 80% of all US imports from abroad are food items. By and large, 15% of these imports are unrefined petroleum, fuel oil, and oil-based commodities. Force instruments, consumables, and hardware represent about 15% of imported items. US monetary approach

US taxation policy

The US of government generally goes through more cash than it gets, and consequently has caused a determined lack of assets as of late. The expected time for governments to sort out some way to adjust spending toward the finish of the story was somewhere close to 1998 and 2001 when a solid economy was creating higher-than-ordinary incomes. The shortage crested since 1945 from 2019 at 9.8% of GDP, yet has been consistently improving from that point forward; in 2015, the shortfall was limited to 2.4% of GDP (Baldwin & Di Mauro, 2020).

Task 3

Balance of Current account

The account's current US deficit was $ 178 billion each in 2020. The US current account deficit rose to its highest level in more than 12 years in the second half of the last quarter, as record increases in consumer spending on imports and exports dominated. The Commerce Department announced a current account deficit that saw advances in goods, administration, and investment both domestically and internationally increased by 10.6% to $ 178.5 billion in the last quarter.

Investment in FDI

Data for the next quarter was revised to show a deficit of $ 161.4 billion from $ 170.5 billion, as recently revealed. Market analysts, when asked by Reuters, estimated that the current account deficit widened to $189 billion between July and September. The current account deficit amounted to 3.4% of the total production in the country in the second quarter of the last quarter. It was over 3.3% in the April and June quarters and was the highest since the last quarter of 2008. In any case, the deficit peaked at 6.3% of GDP in the last quarter of 2005, with the US currently not. Crude oil and fuel (Cohen, 2019).

Consumption of Trading across time

Merchandise imports rose from $ 94.4 billion to $ 602.7 billion, the highest since the last quarter of 2019. The widespread growth in light of interest rate declines following the easing of trade restrictions to reduce the spread of COVID-19 was fueled by car imports. mainly reflecting the cost of protected innovation, most notably innovation licenses. The steps for delivery and individual travel were also described (Bushnell et al., 2017).

Intertemporal business model

Between July and September, consumer spending rose 40.6% annually, aided by more than $ 3 trillion in government aid due to the pandemic. Customer spending fell by a record 33.2% in the next quarter. Merchandise exports returned to last quarter from $ 68.4 billion to $ 357.1 billion. The significant increase in exports was driven by the transport of vehicles, spare parts, and equipment. Exports declined between April and June following the closure of Covid overseas.

Task 4

Exchange rate of US

The dollar lowered the cost of imports and worsened the plight of US exporters, while Reagan's financial backing bolstered spending on clients (Bushnell et al., 2017). As a result, imports to the US are too high, especially from Japan and Germany. America's monetary and financial deficits widened, as did the Japanese and German stock exchanges.

Big mac index

The cost of the Big Mac in the US was $ 3.57 (depending on the store), and the cost of the Big Mac in the UK was “£ 2.29 (depending on the state). Or $ 3.57 / £ 2.29 = $ 1.56. Quite the opposite, and the real exchange rate at the time was £ 2.00 to £ 1”.

The central bank is affected by the exchange rate

Monetary weakness is the reason for picking whether to purchase or sell dollars. A solid economy will draw in the venture from around the world due to its obvious wellbeing and capacity to produce a palatable profit from speculation. As financial backers are constantly looking for the best returns that are not unexpected or “safe,” increased investment, especially from overseas, makes a solid capital record, as a result, the popularity of the dollar (Palmrose & Kinney Jr, 2018).

· The US dollar is the backbone of the global economy and saves money for trade and international accounts.

· Like some other cash, the general estimation of the dollar depends on the development of cash and the vision of the United States.

· By increasing fundamental and specialized variables, market research and global threats also affect the value of the dollar in the world market.

Capital flows and the use of cryptocurrency

Cryptocurrencies are used to circumvent laws and must go against higher standards, the executive director of the Bank for International Settlements (BIS) said. Banner ads and other virtual currencies have grown strongly over the past year, and financial backers are hoping to split their assets during the Covid epidemic (Lin & Wang, 2018). Bulls touch the currency and see the symbol as a "golden computer" and claim that it can serve to support inflation during the financial crisis and for significant growth. Despite this, cryptocurrencies have earned a reputation for their contributions to criminal activity. These are pseudonyms that make it difficult to determine who is trading. Janet Yelled, a US data custodian, recently said the government should "curtail" the use of cryptographic data for criminal exchanges.

References

Baldwin, R., & Di Mauro, B. W. (2020). Economics in the time of COVID-19: A new eBook. VOX CEPR Policy Portal.

Barron, A. R., Fawcett, A. A., Hafstead, M. A., McFarland, J. R., & Morris, A. C. (2018). Policy insights from the EMF 32 study on US carbon tax scenarios. Climate change economics, 9(01), 1840003.

Bushnell, J., Mansur, E. T., & Novan, K. (2017). Review of the economics literature on US electricity restructuring. Unpublished manuscript, Department of Economics, University of California at Davis, Davis, CA.

Cohen, S. D. (2019). Fundamentals of US foreign trade policy: economics, politics, laws, and issues. Routledge.

Epanchin-Niell, R. S. (2017). Economics of invasive species policy and management. Biological Invasions, 19(11), 3333-3354.

Kang, S. H., & Yoon, S. M. (2019). Dynamic connectedness network in economic policy uncertainties. Applied Economics Letters, 26(1), 74-78.

Langpap, C., Kerkvliet, J., & Shogren, J. F. (2018). The economics of the US Endangered Species Act: A review of recent developments. Review of Environmental Economics and Policy, 12(1), 69-91.

Lin, J. Y., & Wang, X. (2018). Trump economics and China–US trade imbalances. Journal of Policy Modeling, 40(3), 579-600.

Oberhauser, A. M., Krier, D., & Kusow, A. M. (2019). Political moderation and polarization in the Heartland: Economics, rurality, and social identity in the 2016 US presidential election. The Sociological Quarterly, 60(2), 224-244.

Palmrose, Z. V., & Kinney Jr, W. R. (2018). Auditor and FASB responsibilities for representing underlying economics—What US standards actually say. Accounting Horizons, 32(3), 83-90.

Phelps, C. E., & Parente, S. T. (2017). The Economics of US Health Care Policy. Routledge.

Polasky, S., Kling, C. L., Levin, S. A., Carpenter, S. R., Daily, G. C., Ehrlich, P. R., ... & Lubchenco, J. (2019). Role of economics in analyzing the environment and sustainable development. Proceedings of the National Academy of Sciences, 116(12), 5233-5238.