In Australia’s economy, there are many domestic and global changes impacting aspects of our economy such as the exchange rate. The exchange rate is the price of an economies currency in relation to another currency. Australia’s currency is determined by the concept of market forces of supply and demand meaning changed in the domestic and global economy will impact the exchange rate dramatically. Domestic influences such as competitiveness of Australian industries and Reserve Bank of Australia intervention will assist in the determination of Australia’s exchange rate. Also international influences such as financial flows into Australia by foreign investors will directly adjust our exchange rates.
As the Reserve increases interest rates, it effectively lowers the demand for money. Increasing the interest rates would be in the Reserves best interest when the nation is experiencing rising inflation. This type of monetary policy is called contractionary monetary policy (Hubbart, 869). On the other hand, to increase demand for money the Reserve can decrease the interest rate. Decreasing the interest rate effectively increases consumer and businesses consumption.
A primary use of the PPI is to deflate revenue streams in order to measure real growth in output. A primary use of the CPI is to adjust income and expenditure streams for changes in the cost of living. The different uses because definitional differences that can be categorized into two critical areas: the composition of the set of commodities and services they include and the types of prices collected for these
The elastic VS inelastic states that the law of demand depends by how much quantity demanded responds to a price change. When a price change causes larger change in quantity demanded then the price would be elastic. However when a price change causes smaller then the demand is elastic. The law of demand states that as prices raise the people would like to buy less and the quantity demanded falls. As the prices fall, the people would like to buy more and the quantity demanded increases.
By contrast, the price elasticity of demand tells you “how much” quantity demanded changes when price changes. It shows the responsiveness of a change in quantity demanded to a change in price. [text: E p. 114; MI p. 114] 2. Why do economists use percentages rather than absolute amounts in measuring the responsiveness of consumers to changes in price? There are two basic reasons.
(Kelly, M. and McGowan, J., 2012)(p.19 & 21). Fiscal policy is more effective in promoting economic growth, by increasing government spending or reducing taxes. Fiscal policy in economic has reflected both political and economic realities. Monetary policy has the ability to slow down the economy in order to promote full employment and inflation. The monetary policy to economic is to increase the amount of money, by cutting interest rates.
This action then helps to create business opportunities, employments, and demands thus resulting in reversion of the initial imbalance (www.en.wikipedia.org/wiki/Keynesian_economics). However, the investment of the government causes a deficit. Government funding source is through borrowing from the economy (i.e. government bonds) and it’s spending exceeds the amount of tax income received (www.en.wikipedia.org/wiki/Keynesian_economics). Friedrich Hayek Hayek recognized connections between three theories thus influencing his perspective of the economy.
What are some examples of government sources of revenue? How are these sources accounted for? DQ2 What is an interfund transfer? Why would government entity transfer money from one fund to another? How are interfund transfers reported on a financial report?
Why are capital gains and dividends taxed at a different rate than ordinary income? Has this always been the case? Discuss the economic and social implications the changes in tax rates for capital gains and dividends. Do you think the existing policies are fair? Why or why not?
Monetary Policy Aaron Ashburn MMPBL/501 Feb-21, 2011 Dr. George Sharghi Introduction There is a consensus among analysts regarding the ability of economist’s to accurately forecast inflation, and consequently it appears that the relationship between real economic activity and inflation is ambiguous. It is the Fed's job to do what it can to reduce unemployment in order for the economy to sustain and to make sure that inflation returns to a level more consistent with its mandate. The central focus of U.S. monetary policy is price stability. Thanks to its control of money markets and banks, the Fed influences interest rates, asset prices, and credit flows throughout the financial system. To help attain inflation goals the Federal