• April 21st, 2016

Economics MAE 203

Paper, Order, or Assignment Requirements

Part A (10 marks)

The economic performance of countries reflects both domestic and global economic conditions. Ever since the Global Financial Crisis (GFC) all major economies have experienced economic crises and downturns to varying degrees. You are required to collect and interpret data on the economic performance of Australia, the United States, and one Euro-zone economy of your choice.
Question 1. (4 out of 10 marks)
Collect and present (in graph format), annual data for the years 2006 to 2014 showing the rate of growth of real GDP, the inflation rate, and the unemployment rate for Australia, the United States and one Euro-zone economy of your choice.
Using the graphing tool in Excel, present three time-series line graphs: one for each economy containing all three variables. Label each axis, give your chart a title and state source of data.

Question 2. (6 out of 10 marks)
Using the data collected for Question 1 – covering the years 2006 to 2014 -, present three comparative line graphs. The first graph will show the rate of growth of real GDP of Australia, the USA and your chosen Euro-zone economy. The second comparative line graph will show the inflation rate of the three economies and the third line graph will show the unemployment rate of the three economies.
What evidence do the data provide of the countries experiencing economic downturns in recent years? On the basis of the data collected, what similarities and differences are there in the performance of the economies? Also contrast the performance of your chosen Euro-zone economy with the performance of the Australian and American economies.

Part B (10 marks)

Question 3. (2 out of 10 marks)

Using the following table, calculate the unplanned change in inventories for each level of GDP, and explain what will happen to GDP. The numbers in the table are in billions of dollars. In your answer create four columns titled (1) “Real GDP” (2) “Aggregate Expenditure” (3) “Unplanned Change in Inventories” and (4) “Real GDP will …”. In the fourth column enter terms such as “increase” or “decrease” or “be in equilibrium” depending on whatever you consider appropriate.

Real GDP Consumption Planned Investment Government Purchases Net Exports
5000 4500 350 300 50
6000 5300 350 300 50
7000 6100 350 300 50
8000 6900 350 300 50

Question 4. (4 out of 10 marks)
In Japan during the late 1980s a massive speculative asset price bubble led to Japan’s central bank sharply raising interest rates thereby causing the asset price bubble to burst and the stock market to crash in the early 1990s. To soften the crash, interest rates in Japan fell to very low levels from the early 1990s to the late 2000s. However, this failed to stimulate consumption or investment spending. Using the aggregate expenditure diagram, explain what might have happened.

Question 5. (4 out of 10 marks)

Starting from long-run equilibrium, use the basic (static) aggregate demand and aggregate supply diagram to show what happens in both the long run and the short run when there is a decline in wealth. Assume labour markets and wages are flexible.

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