Assignment on Economics(Solved)

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

ECONOMICS ASSIGNMENT1
Table of Contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................4
References................................................................................................................................10

ECONOMICS ASSIGNMENT2
Answer 1
The overall health and performance of the economy of a country at a point of time can
be assessed to a considerable extent by observing the trends which prevail in the different
macroeconomic indicators of the country, which primarily include the GDP growth of the
country, unemployment rate, rate of inflation, exchange rate and others. The rate of inflation
shows the dynamics of the overall price levels in the country at a point of time, which is one
of the eminent macroeconomic indicators of immense significance (Gandolfo, 2013). This is
because an extremely high level of price can affect the wellbeing of the consumers in the
economy by reducing their purchasing power, while a low-price level can lead to loss of
productivity in general and an overall stagnation in the country. On the other hand, the
unemployment rate is another significant economic indicator in the country as it shows the
dynamics and employment scenario as well as the overall health of the labour market of the
country. This in turn, shows the well being of the workers in terms of economic abundance,
purchasing power and overall standard of living (Mankiw, 2014).
Keeping this into consideration, the dynamics in the inflation rate and the
unemployment rate, for the period of 2001 to 2016, of one of the most significant economies
in the contemporary global economic scenario, the economy of Australia and their
relationship (if any) can be shown as follows:

ECONOMICS ASSIGNMENT3
Figure 1: Inflation Rate, Unemployment Rate and their relationship for Australia
(2002-2016)
(Source: Abs.gov.au, 2018)
From the above figure, showing the relationship between the unemployment rate and
the inflation rate in Australia within the period (2001-2016), it is evident that the two
concerned variables have a roughly negative relationship, as high inflation rate can be seen to
be related with low level of unemployment and vice versa. This can also be theoretically
supported with the help of the concept of Phillip’s Curve (Johnson, 2017).
Phillip’s Curve Theory
The theory of Phillip’s curve, in the conceptual framework of economics asserts that
there usually exists an inverse relationship between the inflation rate and the rate of
unemployment in a country at a point of time, which is shown by a negatively sloped curve,
which is known as Phillip’s Curve: