Macroeconomics
Subject: Economics
INSTRUCTIONS:
This assignment is intended to enable you to demonstrate effective use of some of the fundamental methods and tools of macroeconomics and to apply elementary principles and models in the respective context of the questions. You are expected to communicate effectively using appropriate economics terminology and models, in the form of diagrams which should be incorporated into your discussion.
Question 1– Please illustrate answers with diagrams
1. What do you understand by the term “the business cycle”? Draw a business cycle diagram and explain its various phases.
2. Define and explain the meaning of Real Gross Domestic Product, inflation and unemployment.
3. How would you expect these economic variables to behave over the business cycle?
4. Collect and graph the quarterly Australian economic statistics of GDP growth rate, inflation and unemployment rates over the last 10 years.
The first step is to collect the required data for the analysis. Go to the World Bank World Development Indicator’s website: http://data.worldbank.org/indicator.
Under the sections “Economic Policy & External Debt” and “Financial Sector”, download data for the following 5 variables:
• GDP (current US$)
• GDP per capita (current US$)
• GDP growth (annual %)
• Inflation, consumer prices (annual %)
• Real interest rate (%)
(Note: In order to download the data for a variable, you simply have to click on the “DOWNLOAD DATA” tab on the right-hand corner of the webpage. Choose to save the data as an “EXCEL FILE” and save it on a convenient location on your computer, such as the desktop.
5. Using the information gained in question 4, what conclusion can you draw as to what stage(s) the Australian business cycle has experienced?
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