Commerce AT1 Introduction

Question 1

Monetary First part

Answer 1

Monetary policy can have both positive and negative impacts on individuals, firms and the Australian economy in general. Monetary policy is controlled by the Reserve Bank of Australia (RBA) who manipulate interest rates to influence household consumption.

Question 2

Monetary Second part

Answer 2

This essay will assess the impact of monetary policy on individuals, where this manipulation of Cash Rate impacts household savings and average variable home loan rates. Monetary policy also affects currency exchange and business credits, which can benefit and disadvantage firms in multiple ways. Lastly, the greater economy is affected through changing cash rates and Quantitative Easing and Tightening.

Question 3

Monetary background

Answer 3

Inflation in Australia has remained relatively low and stable over the past year, with the consumer price index (CPI) rising by 2.0% in the year to December 2022. This is within the RBA’s target range of 2-3%. However, there have been some concerns about rising inflationary pressures due to the measures taken during the COVID-19 pandemic.

Question 4

Fiscal First part

Answer 4

Fiscal policy can have both positive and negative impacts on individuals, firms and the Australian economy in general. Fiscal policy is a government economic policy that is governed by the Parliament who control the amount of money in the economy by employing changes in taxation and government expenditure to influence leakages and injections in the economy.

Question 5

Fiscal second

Answer 5

This essay will assess the impact of fiscal policy on individuals, which implements tax cuts, benefit schemes and subsidies to influence the spending and saving behaviours of this sector. Fiscal policy also introduces initiatives, deductions and grants to firms across a range of sectors. Lastly, the greater economy is affected through Federal Budget reports, which reveal where the government is spending taxation money and towards which long-term strategies.

Question 6

Fiscal background

Answer 6

Each year the government prepares its budget, a document outlining where the government plans on receiving money (receipts) and where it intends to spend that money (expenditure). While covid caused the unemployment rate to increase to 7.5% by July of 2020, the use of subsidies such as JobKeeper Payments and other initiatives allowed this figure to drop back down to pre-covid figures of around 3-4%.