role of the gov

Question 1

australian macroeconomic goals

Answer 1

• 2-3% inflation
• 4-5% unemployment
• 3-5% economic growth

Question 2

business cycle

Answer 2

expansion to a peak to a recession, to depression to a trough recovery (back to start)

Question 3

economic stabilisation

Answer 3

• expansionary and contractionary
  restraining or stimulation growth

Question 4

expansionary (to achieve goals)

Answer 4

• increases econ growth (troughs)
  budgetary –> tax cuts and gov spending increase
  monetary –> lower interest rates

Question 5

expansionary budgetary

Answer 5

tax cuts and gov spending increase
- increase aggregate demand
contributes to deficits
and lowers budget surpluses

Question 6

expansionary monetary

Answer 6

lower interest rates
- encourages borrowing and spending, business investment and discourages saving

Question 7

contractionary (to achieve goals)

Answer 7

decrease econ growth (peaks)
- budgetary –> tax collection and reduce gov spending
- monetary –> increase interest rates

Question 8

contractionary budgetary

Answer 8

tax collection and reduce gov spending
- contributes to surpluses
- lowers aggregate demand

Question 9

contractionary monetary

Answer 9

increase interest rates
discourage:
- borrowing
- consumer spending
- investment

Question 10

impact of high interest rates

Answer 10

• slow aggregate household consumption and paces econ growth more broadly
• rba increases interest rates affects households and businesses - borrowing becomes more expensive, deposits yield more