Macroeconomics Assignment: Dollar Value, Real Interest Rate, Unemployment and Australian Labour Market Trends
Added on 2022-11-13
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MACROECONOMICS ASSIGNMENT 1
MACROECONOMICS ASSIGNMENT
Student Name
Institutional Affiliation
Facilitator
Course
Date
MACROECONOMICS ASSIGNMENT
Student Name
Institutional Affiliation
Facilitator
Course
Date
MACROECONOMICS ASSIGNMENT 2
Question1
a.
A dollar refers to a unit of exchange among countries like the United States of America among
others and is an official currency designated for certain countries in the world (Hoan and Mai
2016, p.442). An easy monetary policy brings down the value of the Dollar which leads to
depreciation in the dollar value. The Government tries to lower the rate of the interest which now
motivates the goal-oriented investors to invest in varying fields. This is now known as easing. A
dollar is said to have lost its value under the following explained circumstances.
When its exchange rates with other countries currencies decline: The value of exchange rates
between countries helps us to determine the value of a dollar. Hence when the exchange rate
decreases then the dollar is said to have lost its value. This is normally measured using the Price
Index. This makes exports to become cheaper while imports will become more expensive. A
depression in the dollar will make exports more competitive.
When more money is printed by a nation’s Central Bank: When large amounts of money are
printed, the value of the dollar decreases when demand increases or when there are constraints in
the value of supply.
When the dollar purchases only a few goods as compared to the previous period: The value of a
dollar is normally determined by the goods and services that it buys. This is calculated by the
Consumer Price Index. It compares the basket of commodities in the previous year with the
current year.
Question1
a.
A dollar refers to a unit of exchange among countries like the United States of America among
others and is an official currency designated for certain countries in the world (Hoan and Mai
2016, p.442). An easy monetary policy brings down the value of the Dollar which leads to
depreciation in the dollar value. The Government tries to lower the rate of the interest which now
motivates the goal-oriented investors to invest in varying fields. This is now known as easing. A
dollar is said to have lost its value under the following explained circumstances.
When its exchange rates with other countries currencies decline: The value of exchange rates
between countries helps us to determine the value of a dollar. Hence when the exchange rate
decreases then the dollar is said to have lost its value. This is normally measured using the Price
Index. This makes exports to become cheaper while imports will become more expensive. A
depression in the dollar will make exports more competitive.
When more money is printed by a nation’s Central Bank: When large amounts of money are
printed, the value of the dollar decreases when demand increases or when there are constraints in
the value of supply.
When the dollar purchases only a few goods as compared to the previous period: The value of a
dollar is normally determined by the goods and services that it buys. This is calculated by the
Consumer Price Index. It compares the basket of commodities in the previous year with the
current year.
MACROECONOMICS ASSIGNMENT 3
When fewer transactions are carried with the dollar worldwide: Most transactions in the world
are normally carried out in terms of dollars. This makes it become the World's Currency Reserve.
When its value declines then less trade is likely to occur. This will now lead to lower profits
accrued by the respective countries.
When there is a fall in the country's Treasury: This will make the interest rates to go high. This
will also imply that the Central Bank will hold a little number of dollars hence the demand
declines. The Central Bank uses the dollars to buy the government’s treasuries. This increases
the money supply in the economy and hence lowers the value of the dollar.
b.
A real rate of interest refers to the rate of interest that has been adjusted to remove the
consequences caused by inflation to reflect the total money to the borrower and the real yield to
the lender whereas a nominal rate refers to the stated interest on a loan without taking into
consideration any fees. Real interest rate takes inflation into account. Real interest can be
considered to be predictive when the true rate of inflation is not known. The nominal rate is
considered before taking inflation into account. Low nominal rates normally encourage
consumers to take up more debts and increase their spending. This is what happened in the case
of the Great Recession. The real interest rate is relevant because it can compel the investors to
take more risks in the market. Nominal interests do not really account for inflation which is the
sudden increase in the price of the goods and services. Inflation directly affects the rate of
interest.
When fewer transactions are carried with the dollar worldwide: Most transactions in the world
are normally carried out in terms of dollars. This makes it become the World's Currency Reserve.
When its value declines then less trade is likely to occur. This will now lead to lower profits
accrued by the respective countries.
When there is a fall in the country's Treasury: This will make the interest rates to go high. This
will also imply that the Central Bank will hold a little number of dollars hence the demand
declines. The Central Bank uses the dollars to buy the government’s treasuries. This increases
the money supply in the economy and hence lowers the value of the dollar.
b.
A real rate of interest refers to the rate of interest that has been adjusted to remove the
consequences caused by inflation to reflect the total money to the borrower and the real yield to
the lender whereas a nominal rate refers to the stated interest on a loan without taking into
consideration any fees. Real interest rate takes inflation into account. Real interest can be
considered to be predictive when the true rate of inflation is not known. The nominal rate is
considered before taking inflation into account. Low nominal rates normally encourage
consumers to take up more debts and increase their spending. This is what happened in the case
of the Great Recession. The real interest rate is relevant because it can compel the investors to
take more risks in the market. Nominal interests do not really account for inflation which is the
sudden increase in the price of the goods and services. Inflation directly affects the rate of
interest.
MACROECONOMICS ASSIGNMENT 4
Question2
a.
People often say that a recession is when a neighbor loses their jobs and depression as when you
lose your own job (Peersmanand Robays 2012, p.1532). There are several observations that may
make people call an economic downtown a depression. An economic depression is a state where
an economy experiences a great downfall. It is often as a result of a negative activity which is
normally based on the Gross Domestic Product.
The stock market crash: The stock market normally comprises of the stocks and the investors
who literally act as the shareholders. When the market experiences a downfall, the value of the
investments does follow the same path. This declines confidence in the economies.
Control of prices and wages: When wages are controlled by the national government and the
companies then they are not allowed to be lowered. The businesses may be forced to lay them off
for the consumers to survive.
Loss of confidence of the consumers: When consumers are not confident in the economy, then
they can’t really survive. They will have to change their spending techniques and eventually, the
demand will decrease. There could be signals such as the worsening unemployment rate, rising
inflation, the decline of property sales and an increase in the credit cards.
b.
A Great Depression is a decrease in the value of aggregate spending. It lasted for a long period of
time. Let’s say up to 10 years. This was the very worst economic depression of all times. It took
place from October 1929 till 1939 the same year. The main cause of depression is factored to the
Question2
a.
People often say that a recession is when a neighbor loses their jobs and depression as when you
lose your own job (Peersmanand Robays 2012, p.1532). There are several observations that may
make people call an economic downtown a depression. An economic depression is a state where
an economy experiences a great downfall. It is often as a result of a negative activity which is
normally based on the Gross Domestic Product.
The stock market crash: The stock market normally comprises of the stocks and the investors
who literally act as the shareholders. When the market experiences a downfall, the value of the
investments does follow the same path. This declines confidence in the economies.
Control of prices and wages: When wages are controlled by the national government and the
companies then they are not allowed to be lowered. The businesses may be forced to lay them off
for the consumers to survive.
Loss of confidence of the consumers: When consumers are not confident in the economy, then
they can’t really survive. They will have to change their spending techniques and eventually, the
demand will decrease. There could be signals such as the worsening unemployment rate, rising
inflation, the decline of property sales and an increase in the credit cards.
b.
A Great Depression is a decrease in the value of aggregate spending. It lasted for a long period of
time. Let’s say up to 10 years. This was the very worst economic depression of all times. It took
place from October 1929 till 1939 the same year. The main cause of depression is factored to the
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