Trade War Between The US and China Assignment

Running head: MACROECONOMICS
Macroeconomics
Name of the Student
Name of the University
Student ID

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Table of Contents
Answer a..........................................................................................................................................2
Answer b..........................................................................................................................................2
Answer c..........................................................................................................................................6
Answer d..........................................................................................................................................8
Reference.......................................................................................................................................10

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Answer a
The article discussed about the issues that have caused or will cause due to the US and
China trade war. The article has discussed how severe the trade war between the US and China
in the last 15 months have been. Both the countries have imposed billions of dollars’ worth of
tariff on each other’s product. This has resulted the drastic decline in manufacturing industry of
the both the countries, especially the US. The trade war has impacted all the other economies that
are directly or indirectly connected to these two countries. Rating agency Fitch gave an
estimation of growth of global economy which further indicates that there the economy entering
into another recession. The GDP growth estimation globally and for China has been reduced.
Additionally, the articles estimated GDOP growth of Australia will slow down too. This is
because of Australia’s high trade dependency on China. 30% of total export of Australia goes to
China. Hence, fall in slowdown in China’s economy will reduce imports from Australia and thus
export revenue of Australia will fall. This fall in export revenue impacts the economy of
Australia adversely.
Answer b
Four most common national macroeconomic objectives are full employment, price
stability, economic growth rate and balance of payment equilibrium. Firstly, full employment is
the condition of an economy when all the willing workers are employed and utilized in the most
efficient ways. Under full employment, a country can produce the maximum amount of output
which is potentially possible (Glynn and Booth 2018). However, it is argued that full
employment not an ideal condition for economic growth because at this level of employment, no
employee has the fear of losing job and thus there is chance of rise in job shirking. As a result,
the productivity of employees will fall and thereby the output of the economy falls. Hence, it is

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suggested that an unemployment rate of 4.5% is ideal for an economy to operate efficiently.
Secondly, price stability is an important macroeconomic factor because unstable price fluctuates
the inflation rate since percentage rise in price is known as inflation rate. From law of demand
and supply it is known that with rise in price demand for goods fall. Hence, excessive inflation
reduces the aggregate demand for goods and services in an economy decreases which further
reduces the business confidence and causes aggregate supply to fall. Consequently, the total
output of the economy declines causing fall in economic growth. Thirdly, economic growth rate
is the percentage increase in overall output of an economy. It is often referred as GDP growth
rate. Every country wants to earn more and for increase in GDO is important (Gonzalez Minguez
and Martinez-Carrascal 2019). With continuous rise in GDP of country, its economy expands
causing growth of the economy. Economic growth increases the income of individuals of an
economy too. Along with that consumer confidence and business confidence increases which
further contributes to rise in consumption and investment. Therefore, for development of
economy of a country economic growth is necessary. Fourthly, balance of payments is the
account of total international transactions made by residents of country. It includes all the capital
outflows and capital inflows occurred in a country. With more capital inflows than capital
outflows the balance of payment of a country increases, which is known as balance of payments
surplus. Similarly, with more capital outflows than inflows balance of payment decrease, which
is termed as balance of payment deficit. There is no significant impact of change in balance of
payment in the short term.
Australia is prosperous economy and it has shown good rate of growth over the years but
in the recent years, there is a decline in the GDP growth rate of the country. It can be seen figure
1 that until mid of 2018 there was upward trend in the GDP growth of Australia. However, after