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Eonomics for Business - Assignment

   

Added on  2021-05-30

13 Pages1585 Words60 Views
Running Head: EONOMICS FOR BUSINESSEonomics for BusinessName of the StudentName of the UniversityCourse ID
Eonomics for Business - Assignment_1
EONOMICS FOR BUSINESS1Table of ContentsAnswer 1..........................................................................................................................................2Answer 2..........................................................................................................................................4Answer a......................................................................................................................................4Answer b......................................................................................................................................5Answer c......................................................................................................................................6Answer d......................................................................................................................................7Answer e......................................................................................................................................9List of references...........................................................................................................................11
Eonomics for Business - Assignment_2
EONOMICS FOR BUSINESS2Answer 1In determining overall performance of an economy, focus needs to be given onmovement of price level and performance of labor market. The commonly used indicator formeasuring performance of the labor market in unemployment. The rate of unemployment in aneconomy presents the number of unemployed person as a percentage of total labor force.Inflation on the other hand measures the gradual upward movement of price level (Chan, Koop& Potter, 2016). Rate of inflation is generally measured from percentage change in cost of livingindex between two consecutive years. Inflation and unemployment though belongs to differentarea of macroeconomic aspect; an association is often observed between these two. Rate ofunemployment influences the price level through influencing wage growth. An inverserelationship is found to exists between condition of price level and that of the performance oflabor market. The relationship was first discovered by A.W.Phillips based on macroeconomicdata of UK economy (Daly & Hobijn, 2014). Phillips proposed a hypothesis that inflation goesup with a decline in the rate of unemployment. The price level moves in reverse direction intimes of rising unemployment. The proposed association between unemployment and inflation isverified using inflation and unemployment data of Australia from 1961-2016.
Eonomics for Business - Assignment_3
EONOMICS FOR BUSINESS344.555.566.5711.522.533.544.55f(x) = − 0.15 x + 3.52R² = 0.01Inflation and Unemployment UnemploymentInflationFigure 1: Association between inflation and unemployment (Source: abs.gov.au/, 2018)In order to observe whether there exists any association between inflation and unemployment incontext of Australian economy, a scatter plot between the variables is construction. A trend lineis set to observe the overall relationship for the chosen time period. The trend line has a generaldownward slope. The downward sloping trend line represents an inverse relation betweeninflation and unemployment. From the estimated trend equation, the elasticity of inflation withrespect to unemployment is obtained as -0.154. From the unemployment coefficient it can beinterpreted that every unit decreases in unemployment is associated with an increase in inflationby 0.15 percentage point. The reason behind inverse relation between rate of inflation and that of unemploymentcan be explained with the theory of wage growth. Low rate of unemployment indicates a highdemand for labor. In the presence of high labor demand wages are generally high. The higherwage cost reflected in high prices of commodities (Coibion, Gorodnichenko & Kamdar, 2017). A
Eonomics for Business - Assignment_4

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