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National Economic Policy

National Economic Policy
Submission: Before commencing the assignment you must read the notes below and also in page 3.
• No referencing is required for citation from the textbook.
• Answer all three of the questions.
• You must not scan diagram from the textbook, or any other electronic or printed sources. You must draw it.
• 1500 word limit is not binding. But please note that a long answer is not always a good answer; a good answer is concise and to the point.
You must also read the following sections in the Unit Outline:
• Submission and assessment policy
• Plagiarism
Suppose the Reserve Bank of Australia (RBA) is concerned about recession and wants to adopt an expansionary monetary policy. Explain, using the IS-LM diagram(s), how the effectiveness of monetary policy may depend on
a) interest sensitivity of investment spending
b) interest sensitivity of money demand.
[4+4= 8 marks]
After the Second World War, many countries, including the USA, experienced a baby boom—an increase in population growth rate.
a) Use the Solow model to demonstrate the effect of a baby boom on the steady state capital-labour ratio, standard of living, and real GDP.
b) The US economy experienced strong growth in real GDP per capita during the years of baby boom. Use the Solow model to reconcile this fact with your answer to part (a).
[3 +3 = 6 marks]
The Classical Macroeconomic model suggests that there is no need for the government to stabilize the economy with monetary or fiscal Policy. Use AD-AS diagram to discuss this statement. Explain, using the AD-AS diagram, how the stabilization policies can be very effective in the model that assumes pricestickiness in the short-run.
[6 Marks]
a. All assignments are to be submitted online in the area provided in ClouldDeakin. They are counted as ‘on time’ if submitted by 11:59pm AEST or AEDST on the due date. If necessary, you can look up your local time at http://www.whitepages.com.au/wp/helpfulInfo.do?category=info&item=worldTime.
When submitting online, you must check that you have submitted work correctly by following the instructions provided in ClouldDeakin.
b. The following declaration relating to academic honesty must be made and submitted along with any assignment:
“I certify that the attached work is entirely my own (or, where submitted to meet the requirements of an approved group assignment, is the work of the group), except where material quoted or paraphrased is acknowledged in the text. I also declare that it has not been submitted for assessment in any other unit or course.”
A Faculty Assignment Attachment Sheet containing this declaration is available online in CloudDeakin. A copy of this sheet must be completed and attached with the online submission.
c. No extensions will be considered for the assignment submission due date unless a written request is submitted and negotiated with the designated Unit Chair/Coordinator.
d. Assignments or other assessment tasks conducted during the semester submitted late without an extension being granted will not be marked. These will be held until final grading and may be taken into consideration in a pass/fail situation.

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