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Economics Assignment (Question and Answer)

   

Added on  2021-01-03

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ECONOMICS

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1QUESTION 1..................................................................................................................................1Problem of using the unemployment rate as the sole indicator to infer the performance of thelabour market...............................................................................................................................1Useful labour market indicators can be used to supplement assessing health of the labourmarket..........................................................................................................................................1QUESTION 2..................................................................................................................................3Australian Government has promised to increase national infrastructure spending in 2018 asper federal budget........................................................................................................................3Long-run effect on level of productivity in Australia..................................................................5General equilibrium model which explains long run effects of national infrastructure plan onlabour, capital market and products.............................................................................................6Exposition of Australian economy with consideration of full employment................................6QUESTION 3..................................................................................................................................9Federal budget affecting personal tax cut for low and middle-income standards.......................9Income- Expenditure framework in tax cut raise in level of output and economic consumption.....................................................................................................................................................9QUESTION 4................................................................................................................................11Wealth generated by booming houses and stock market in Australia.......................................11Advising RBA governor of inflation target rate and monetary policy intervention..................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14

INTRODUCTIONEconomic concerns are the main area of government in making decision as well as strategiesfor fruitful development. In the present report there will be analysis made on Australianeconomic environment. Study will highlight all key issues and obstacles which have been facedbay professionals for generating fruitful income. Moreover, there will be demonstration of theplanning made by federal government in budget of 2018-2019. Along with this, there will bediscussion over monetary system as well as inflation control plan made by government for thefruitful development of the economy.QUESTION 1Problem of using the unemployment rate as the sole indicator to infer the performance of thelabour marketCondition of labour market is very essential to understand economic development. Forthis, unemployment rate is taken as a metric for slack in respective scenario, but there are manyproblems associated. This aspect does not measure health or strength of labour market. Thisconcept focuses on dividing individuals on the basis of those who are not employed, wants towork and also applying for jobs (Chubb & Watermeyer, 2017. Pp.42(12). 2360-2372). Some ofthese people are defined as unemployed. There are numerous people who are not employed dueto some reasons which are not included in statistical data that is provided by government. Apartfrom that, employees who are completely discouraged or even marginally attached to labourmarket are not counted in official unemployment rate. Government statistics are does notprovide complete in-depth analysis of circumstances which are occurring in this scenario.Unemployment can be used for measuring disequilibrium of labour market. As provides insightto the aspect of mismatch between demand of employer for various types of labours andwillingness of employees and ability of supplying that specific amount of labour.Useful labour market indicators can be used to supplement assessing health of the labour marketApart from unemployment rate, there are other factors which can be used for assessinghealth of labour market. Some of them can be labour market churn, job leavings, job openings aswell as gross employment gain numbers.Churn focuses on all facts which are providing net gain in jobs. Around 5 million ofindividuals leave and starts are new job every month. Information related to opening of jobs,hires as well as separations that can make up labour market churn. These data in government1

reports are known to be Jolts. Changes in number of employment affects net ratio of workingpeople in a nation. Huge number of churn indicates healthier labour market. As it provides closerinsight for measuring number of available jobs at a specific time period. Exact number of employment can directly show strength of labour market. When thedemand for labour will increase, more employees would get employed. A better economyrecruits more individual. Despite of checking changes in employment rate, one must focus onfluctuation of employment rates. With this indicator on can assess health of labour market.Participation of labour force facilitate in measuring percentage number of individualswho are eligible or either officially unemployed or working. Changes in number of workersparticipation rate, serves a perception of customers regarding strength of labour market. When itwill grow strong, ideal high salary offering jobs would be available and individuals will createinterest for joining labour force and raising the participation rate accordingly (Penrose, 2017. Pp.pp. 33-48). Low rate of participation depicts weakness of labour market. Part time workers, whocontributes for part time in an economy is considered to be important aspect. When number ofthese labours gets exceeded, labour market starts becoming weak. Job vacancies can be regarded as a source of conveying data regarding prospect ofemployment and contributes in assessing conditions of labour market. The ratio of vacancies tonumber of unemployed individuals usually increases when market of workers is considered astight. High ratio depicts that number of jobs available are more as compared to people who arein search for. According to the provided graph, in Australia ratio of vacancy is high but belowpre-crisis level. It is considered to be in consistent as compared to spare capacity which isindicated through unemployment rate. High vacancy rates also indicate greater mismatches ofskills or frictions. These aspects lead to maximise ratio of vacancy to unemployed due toshortage of labour which have appropriate skills. It can also change due to composition ofeconomy.2

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