Sample Assignment on Economics

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

ECONOMICS ASSIGNMENT1
Table of Contents
Introduction......................................................................................................................................2
Answer 1..........................................................................................................................................3
Causes of market failure..............................................................................................................3
Possible government policies for correcting this market failure.................................................4
Answer 2..........................................................................................................................................4
Types of unemployment..............................................................................................................4
Use of monetary policy for addressing unemployment problem.................................................5
Impact of monetary policy on the Australian economy using AD-AS curve..............................5
Answer 3..........................................................................................................................................6
Determination of value of $AUS.................................................................................................6
Impact of change in Australian currency on the external sector.................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

ECONOMICS ASSIGNMENT2
Introduction
The purpose of this assessment is to analyze the importance of government intervention
for improving the state of an economy. The government intervention in a particular economy is
necessary as it helps to redistribute income for improving equality of opportunity as well as
equality of outcome (Ireland 2016). This study focuses on the causes of market failure and
government policies for correcting market failure. The importance of monetary policy for
addressing unemployment problem in Australia is also discussed in this study. The effect of
monetary policy on the Australian economy is also elucidated in this study. Furthermore, the
effect of change in Australian currency is also explained in this assessment.
Answer 1
Causes of market failure
As per Goodwin et al. (2015) market failure occurs when inefficient allocation of
resources occurs in free market. It happens when price mechanism fails in allocating scarce
resources effectively or market force operation leads to social welfare loss. There are some main
causes of market failure, which include-
Incomplete market- Absence of markets for certain things such as property resources and
public goods is one of the reasons of market failure. Markets are missing mainly under
perfect competition.
Externalities-The existence of externalities in production as well as consumption also
causes market failure. Brue et al. (2014) opines that, externalities are considered as
market imperfections where market provides no price for the service. These externalities
also leads to resources malallocation and causes production or consumption to fall of
Pareto Optimality.

ECONOMICS ASSIGNMENT3
Property resources-Another reason for market failure is general property resource. The
common ownership along with open access might also lead to exploitation where the user
ignores the impact of their action.
Over provision of demerit products- Over consumption of demerit commodities also lead
to negative externalities.
Underproduction of merit products- Under production of merit products also leads to
failure in market.
Possible government policies for correcting this market failure
When market forces fail in allocating resources properly, the government might attempt
to intervene policies for correcting market failure. The government might intervene in the market
through several ways –
The government might subsidize goods with positive externalities. This in turn increases
supply as well as reduce product price for encouraging production or consumption of a
commodity.
The government also adopts taxation policy for reducing supply of products and therefore
enhancing price for discouraging production or consumption of products.
The government integrates rules regarding production or use of products and backs this
legally via fines. This helps the government to tackle negative externalities.
Answer 2
Types of unemployment
There are numerous types of unemployment, which are given below-