Coursework on The Global Economy: Fiscal Policy, Investment Analysis

This report delves into the intricacies of the global economy, exploring the impact of fiscal policy, specifically tax cuts, on real GDP using the aggregate expenditure model. It evaluates the effects of investment in both the long and short run, illustrating how changes in investment influence aggregate demand and supply, ultimately affecting price levels and real GDP. The report also provides policy recommendations for central banks to stimulate investment, focusing on interest rate adjustments and money supply management. Furthermore, it examines the roles and skills of an accountant, aligning them with the author's aspirations to work in a banking institution, and includes an interpretation of a video discussing career paths for economists, followed by a detailed action plan for professional development. The analysis incorporates relevant economic theories and models to provide a comprehensive understanding of the topics discussed.

Running Head: THE GLOBAL ECONOMY
The Global Economy
Name of the Student
Name of the University
Course ID

1THE GLOBAL ECONOMY
Table of Contents
Part B...............................................................................................................................................2
Answer 4......................................................................................................................................2
Answer 5......................................................................................................................................3
Evaluation of investment in the long run.....................................................................................3
Evaluation of investment in the short run....................................................................................5
Policy recommendation for central bank.....................................................................................6
Part C...............................................................................................................................................7
Introduction..................................................................................................................................7
Accountant: Roles and Skills.......................................................................................................7
Appropriateness of the job in accordance to my skills................................................................8
Interpretation of Video................................................................................................................9
Action Plan..................................................................................................................................9
References......................................................................................................................................10

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Part B
Answer 4
Cutting tax rate is an instrument government’s expansionary fiscal policy. During
recession the economy experiences a decline in output, employment, price level and other
necessary variables. Government through fiscal or monetary policy instrument aims to stimulate
output and other important variables (Mankiw 2014). The effect of a cut in tax can be understood
using the aggregate expenditure model.
Figure 1: Effect of a tax cut on real GDP
(Source: as created by Author)

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The figure above shows determination of real GDP in the aggregate expenditure model. AE1
curve shows the aggregate expenditure which is sum of all the planned expenditure. The 450
line, passing through the origin is the locus of all the points where aggregate spending equals real
GDP. The intersection of these two line determine equilibrium level of real GDP. M is the stable
equilibrium with stable output of Ye. A decrease is tax has a positive influence on aggregate
expenditure and hence, shifts the aggregate expenditure curve upward (Johnson 2017). The
aggregate expenditure however cannot shift to the full extent of tax cut. It is discounted by the
fraction of marginal propensity to consume. The AE curve thus shifts by less than $20 billion
leading to an output expansion to Y1.
Given that marginal propensity to save is 0.2. The marginal propensity to consume is thus
obtained as (1 – MPC) = (1 – 0.2) = 0.8.
Therefore, a $20 billion cut in tax shifts the aggregate expenditure curve leftward by (0.8* $20
billion) = $16 billion.
From the multiplier effect, real GDP would then increase by
(MPC/MPS) *$20 billion = (0.8/0.2) * $20 billion = $80 billion.
Answer 5
Evaluation of investment in the long run

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Figure 2: Effect of investment on long run equilibrium
(Source: as created by Author)
Investment is an important component of aggregate demand. Change in investment
expenditure thus causes a change in aggregate demand. A decline in investment in the long run
has a direct impact on aggregate demand and shifts the aggregate demand curve inward. The
effect on real GDP however depend on the position of aggregate demand and aggregate supply
curve. The long run aggregate supply curve is vertical at the level of corresponding to potential
level, as indicated as Y* (Dosi et al. 2016). A contraction of investment in the long run shifts the
aggregate demand curve from AD to AD2. In the long run the decline in investment does not
have any impact on real GDP, which stays at Y*. The entire effect is on price level that sets to a
lower level.
The low price in the short run leads to a lower aggregate supply shifting the short run
aggregate supply (SRAS) curve to the left. This then increase the price level. An increased price

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level encourages producers. The adjustment continues unless the economy reaches to the long
run equilibrium.
Figure 3: Short run adjustment in equilibrium
(Source: as created by Author)
Evaluation of investment in the short run
The aggregate supply curve in the shirt is positively sloped. As there is opportunity to
explore resources more, aggregate supply increases with increase in price level. In the figure
below AS curve signifies initial supply curve and AD1 is the initial aggregate demand curve
(Buiter 2014). Following a decline in investment, aggregate demand curve shifts leftward to
AD2. Under this situation the equilibrium shifts from e to e1. The resulted output and price is set
at a lower level as compared to that in previous scenario.

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Figure 4: Impact of a decline in investment in the short run
(Source: as created by Author)
Policy recommendation for central bank
The central bank need to adapt policy that can stimulate investment. The bank should
lower the interest rate to encourage investors to borrow from banks. This needs to be done
through increasing money supply in the economy. When supply of money increases then
equilibrium interest rate falls (Bernanke, Antonovics and Frank 2015). Central bank can inject
money in the economy thorough purchasing financial assets or corporate bonds.

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Part C
Introduction
Economists, in the contemporary period, with increase in the domestic as well as national
economic and commercial activities across the globe, play different roles of key importance and
the number of scopes in the professional domain of economists have been increasing with time.
In this aspect, the primary types of jobs which attract me is that of the role of accountant in
public organizations. Keeping this into consider, after completion of my degree I want to pursue
for a career of an accountant in one of the most prestigious banking institutions in the country,
which is the National Australia Bank.
Accountant: Roles and Skills
The job of an accountant is primarily to maintain all the financial accounts of transactions of the
organization on which the working and the overall profitability of the organization as well as the
sustainability of the same in the long run depends. The customer satisfaction also depends
considerably on how efficiently and transparently an organization performs, the attribute being
even more significant in financial institutions, in doing which the accountants play a crucial role.
Thus, to be eligible for this post, it is of immense importance for the candidates to have extensive
analytical abilities to empirically as well as intuitively analyse the situations, which as a student
of economics and as a person passionate about the wellbeing of the people of my country, is
present within me. The primary responsibilities and roles of an accountant involves the following
tasks:
 Preparation of the financial records and ledger of the organizations and maintenance of
the same at regular intervals

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 Preparation of the different financial statements and statements of different tax returns as
well as of that of the different transactions made by the organizations in its business
operations
 Dissection, collation and arrangement of the confidential client data and maintenance of
the records, by maintaining their confidentiality and transparency such that the trust of
the clients is not broken and the objectives of the organizations are also fulfilled
 Monitoring liaison and ATO on client matters
For fulfilling these roles, an extensive analytical and accounting knowledge is required as an
accountant along with the basic knowledge of different statistical and other tools of computer
like that of MS Office and Excel. Dealing with huge numerical data and huge information bases
requires organized as well as energetic attitudes along with the presence of the virtue of
punctuality. Personally, I feel that I possess these skills which are extremely essential for the role
of accountant in a bank of such a huge stature like National Australia Bank.
Appropriateness of the job in accordance to my skills
According to the self-awareness test, the primary traits of my personality are the presence of
investigative abilities, realism, enterprising abilities and my primary ability is that of solving
problems especially linked to people and data. Keeping this into consideration, I find myself to
be appropriate for the job of an accountant:
Values- I believe in working for a cause and can work relentlessly if I am attracted by the values
Interests- I specifically feel interested in handling, arranging, analysing and interpreting data
Personality- I have an investigative personality which may help in my role of an accountant

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Skills- My problem-solving skills and abilities to analyse data and financial records can be
helpful for accountant.
Interpretation of Video
From the video of that of Anjali Suriyakumaran, it can be seen that she views the scopes of
economists to be huge. Anjali, being a graduate in economics and currently working as an
analyst in ACCC, emphasizes on several important aspects which may be found to be relevant
for the aspiring economists for the purpose of building their future career. The primary
interesting aspect of the interview is that Anjali talks about her engagements in different non-
academic social activities, which she emphasizes to be an integral part of student life.
Anjali, who pursued a full-time internship in the summer break of her academic span, asserts that
gaining such experiences before looking for full time jobs are important as the same helps the
students in learning about different crucial aspects like time management, work load handling
and organizing capabilities in the professional domains, even before they enter the professional
life. She also suggests the students to take guidance of seniors who have already done such
internships.
Action Plan
I have already acquired considerable amount of accounting skills as well as information
regarding the types of roles which I may need to play in my professional domain provided I get
my dream job. However, I need to gain some professional experience in my term break in order
to be ready and more eligible for jobs once I complete my degree. I also need to improve my
English as I may need to communicate a lot in my professional domains. I plan to take
accounting management as my subject and also plan to participate in MWL201 Community

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based volunteering. I plan to enroll in Certified Practicing Accountants Program, while searching
for internships.
References
Bernanke, B., Antonovics, K. and Frank, R., 2015. Principles of macroeconomics. McGraw-Hill
Higher Education.
Buiter, W.H., 2014. Temporary Equilibrium and Long-Run Equilibrium (Routledge Revivals).
Routledge.
Dosi, G., Napoletano, M., Roventini, A. and Treibich, T., 2016. The short-and long-run damages
of fiscal austerity: Keynes beyond Schumpeter. In Contemporary Issues in Macroeconomics (pp.
79-100). Palgrave Macmillan, London.
Johnson, H.G., 2017. Macroeconomics and monetary theory. Routledge.
Mankiw, N.G., 2014. Principles of macroeconomics. Cengage Learning.