Macroeconomics Answers

Use diagrams/graphs of the money market and also AD-AS to support your discussion

The rate of interest is a price:
a. Of what is it the price? (1 mark)
b. What determines this price? (Sketch a relevant graph of the money market). (2 marks)
c. What factors influence the demand for money? (2 marks)
d. What factors influence the supply of money? (2 marks)
e. If the money market is in short-run equilibrium, explain the adjustments that will take place for: i) an increase the in money supply (2 marks)

Explain how the change you advocate would affect the cost and availability of credit

Explain how the change you advocate would affect the cash rate

Why do country borrow money instead of printing it when they need money?

Part B
The table below gives contains hypothetical international balance of payment data for Australia.
All figures are in billions. Calculate the missing elements (i) – (vi), with the appropriate sign
(+ or -) and enter the values in the table. (6 marks)
INTERNATIONAL BALANCE OF
PAYMENTS
(HYPOTHETICAL
DATA)
CURRENT ACCOUNT
(1) Goods exports +150
(2) Goods imports -200
(3) Goods balance (i)
(4) Services exports +75
(5) Services imports -60
(6) Goods and services balance (ii)
(7) Income balance +12
(8) Current transfers net -7
(9) Current account balance (iii)
CAPITAL AND FINANCIAL ACCOUNT
(10) Capital account balance -10
(11) Financial account balance +90
(12) Direct Investment +65
(13) Portfolio Investment (iv)
(14) Financial Derivatives 0
(15) Other Investment 0
(16) Reserve assets -5
(17) Capital and financial account balance (v)
(18) Net errors and omission (vi)

Part A
Assuming a system of floating exchange rates between Japan and Australia, indicate whether
each of the following would cause the Japanese yen and the AUD to appreciate or depreciate.
a. Australia unilaterally reduces tariffs on Japanese products.
b. Japan encounters severe inflation.
c. Deteriorating political relations reduce Japanese tourism in Australia.
d. The Australian government invites Japanese firms to invest in oil fields in Australia.
e. The rate of productivity growth in Australia diminishes sharply. (5 marks)

What change in open market operations would you recommend? (1 mark)
b. Explain how the change you advocate would affect the cash rate. (2 marks)
c. Explain how the change you advocate would affect the cost and availability of credit.
(2 marks)
d. Use diagrams/graphs of the money market and also AD-AS to support your discussion

In the 1800's the USA ran into multiple banking crisies - approximately one every 20 years.

In the last 100 years - we have run into 3 crises - the 1930's and bank failures during the Great Depression. The Savings and Loan Crisis in the mid/late 1980's, and the Financial Crises on 2008-2009.

Based on this, explain hwo important you think government regulation and oversight is for the health,well-being, and proper functioning of the US Financial System. Also,add one item of your own, where you would like to see more government regulation and oversight.

a. Of what is it the price? (1 mark)
b. What determines this price? (Sketch a relevant graph of the money market). (2 marks)
c. What factors influence the demand for money? (2 marks)
d. What factors influence the supply of money? (2 marks)
e. If the money market is in short-run equilibrium, explain the adjustments that will take place for:
i) an increase the in money supply (2 marks)
ii) increase in the demand for money (2 ma