Impact of Drought in Australia on Macroeconomic Equilibrium

Economic
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Impact of drought in Australia
Macroeconomic equilibrium
The macroeconomic equilibrium is known as the condition in the economy where the
quantity of the demand will be equal to the supply when there will change in either the
demand or supply, it will be resulting to the change in price, level of unemployment along
with the rate of inflation. The macroeconomic equilibrium condition takes place when
savings + taxation + imports equals to Investment + government expenditure + exports.
The main macroeconomic variables are the gross domestic product, rate of
unemployment, rate of interest and inflation. The macroeconomic variables can be done by
measuring the economic output, tracking the rate of unemployment measuring the rate of
inflation and also by monitoring the rate of interest.

Impact of drought
Figure 1 changes in demand and supply
As a result of drought, the supply of most of the commodities specially the
agricultural crops decrease. As the aggregate supply curve moves to left the quantity of goods
supplied will also decline. Since drought will damage most of the agricultural crops, the
quantity of goods will also produce leading to the rise in price. The effects of drought are
known to be quite severe in nature. Farmers might lose a huge amount of money when
drought will be destroying crops. Drought is also known to be one of the recurring feature in
case of Australia. One of the most obvious impact of the drought will be on the volume of the
agricultural production. When the conditions of drought becomes quite severe in nature, the