Microeconomics: An Assessment of AS-AD of the Australian Economy (Coursework Sample)

MICROECONOMICS
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Question 3a
With the global growth being reported at less than 3.5% consistently for four years and projected to stand at 3.3% this year, Malcolm Turnbull has prioritized Australia’s growth rate aspects in the planning and establishment of the national budget. The income level and the economy's price levels are the core determinants and variables influencing economic growth hence in focusing on Australia's growth; the finance ministry is ought accurately to impact these two variables for the desired outcome. This entails increasing the income level of the economy and on the other hand reducing the price levels of goods and services to instill economic growth.
Using the aggregate demand and aggregate supply (AD-AS) model, establishing the critical action plans required to achieve the hoped for intentions of Malcolm Turnbull shall be achieved. The aggregate demand model majorly focuses on the economic price levels of the commodities in the economy CITATION Ure16 \l 1033 (Uren, 2016). In the AD curve, the real income is plotted against the interest rates plotted vertically as on the other hand; the AS plots the income versus the price levels CITATION Ure16 \l 1033 (Uren, 2016). The AD-AS model draws the relationship between the variables plotted AS and AD curves.
Demand is perceived of being the core determinant of the price levels in the economy with an increase in the level of demand for goods and services causing a decrease in the prices of goods and services. This is so, following the fact that an increased demand causes increased production which causes economies of scale whereby the costs of goods and services shall be produced on a continuous being causing ultimate reduction of the costs of production and increased quality of the goods and services produced. Besides the positive implication of the increased demand, the employment level is a great attribution of the increased demand CITATION Sam11 \l 1033 (Mukherjee, et al., 2011). With the increased employment level, that means that there shall be a great increase in the proportion of the income available to be spent on the goods and services available in the market. The Australian government shall be forced to increase its expenditure to reduce the unemployment levels and also increase the corporate tax incentives to reduce the costs of production that may cause an increase in the prices of commodities in the economy. CITATION Ure16 \l 1033 (Uren, 2016) Therefore, with the incorporation of these set practices, the hoped for intentions shall be achieved featuring lower unemployment levels, high income, higher demand and lower prices.
Question 3b
The hoped for intentions are purported for the overhaul being with the long term aspect being the center of focus for the growth of the Australian economy. However, the intent of the desires faces great hurdles in achieving the planed objectives. Lagarde in the article holds and warns that the growth recovery stands slow, risky and fragile to meet the set goals with the Australian central bank being tasked with an enormous task to support the demand aspects of the Australian economy. This uncertainty includes the Australian exchange rate being a critical component of the economies demand level CITATION Sam11 \l 1033 (Mukherjee, et al., 2011).
Over time, the Australian dollar is reported to have lost great value to the USD, a being that has see...