Economic Principles and Concepts - Economics Assignment

Internal Code:TV627

Economics Assignment:

Questions:  The Australia government recently signed a contract to build a new Navy shipyard in Western Australia and plans to spend $90b. Assuming fixed prices and that all monies will be spent in Australia, explain how the Australian economy will be affected by the $90b in new government purchases using AD-AS framework. (Remember: If you do not talk about the AD and AS curves, you are not using the AD-AS model.) b. Why is traditional term ‘business cycles’ a misnomer? How does your answer relate to the easy or difficulty of forecasting peaks and troughs?

Question 2: Government survey determines that typical family expenditures each month in the year designated as the base year which are as follows: Base Year family expediture on: $ 20 pizzas                                      :       10 each Rent of apartment                     :        600 per month Petrol and car maintenance    :         100 Phone service                             :          50 In the year following the base year, the survey determines that pizzas have risen to $11 each, apartment rent is $640, petrol and maintenance has risen to $120, and phone service has dropped to in price to $40. a. Find the CPI in the subsequent year and the rate of inflation between the base and the subsequent year. b. The family’s nominal income rose by 5% between the base and the subsequent year. Are they worse off or better off in terms of what their income is able to buy?