Macroeconomics Report: Unemployment, Interest Rates, and Australia

This macroeconomics report analyzes the factors influencing the unemployment rate in Australia, considering both full-time and part-time employment. It explores the application of the Keynesian Aggregate Expenditure model to understand macroeconomic equilibrium and the impact of aggregate demand and supply (AD-AS) on interest rates. The report further examines the use of the dynamic AD-AS model to analyze the Reserve Bank of Australia's (RBA) potential decisions regarding interest rate adjustments in the context of predicted economic conditions. The analysis covers the influences on unemployment, the equilibrium process, and the implications of monetary policy decisions on the Australian economy, drawing on relevant economic literature and data to support the arguments.

MACROECONOMICS

TABLE OF CONTENTS
Question 1b Determining the influences to the unemployment rate in Australia in context with
full-time and part-time positions.................................................................................................1
Question 2 Discussing the equilibrium process of moving a new macroeconomic equilibrium
output by implicating aggregate expenditures (AE)....................................................................2
Question 3 Implicating the use of AD-AS model to analyse the interest rates predicted by the
market economists.......................................................................................................................3
Question 4 Applying the dynamic AD-AS model for analysing the circumstances for RBA in
raising the interest rates in next 12 months.................................................................................5
REFERENCES................................................................................................................................7

Question 1b Determining the influences to the unemployment rate in Australia in context with
full-time and part-time positions.
Currently, after world war 2nd the impacts of unemployment rate have been controlled in
Australia for only 1-2%. It does not have the appropriate control over the economic growth and
development. Thus, such variations have affected the per capita income of citizens. The rise in
population as well as increasing number of employees have reduced the number of jobs stated in
every field. Along with this, the impacts of full time participants on the job have negative
impacts in raising the unemployment rate in economy.
The impacts on growth of unemployment rate which insist that there are large number of
full time participators in the economy that of part time. Thus, 4 out of 5 individual which are
engaged in full time employment (Jobs boom puts RBA under pressure to raise interest rates,
2018). Thus, with impacts o this it has reduced the employment rates in Australia. It has recently
been analysed here that, work and employment rates in nation helps in raising the per capita
income as well as better economic growth. If the number of employees is higher than the number
of jobs is stated in environment than there will be negative impacts seen on the economic
growth.
There will be near half a million individuals will be unemployment if the number of full
time employees increased. They are people which will leave the labour force with several causes
such as raising children, retirement, health, going back to education and various alternative
reasons for shifting them for becoming labour force (Clemens and Heinemann, 2018). However,
it can reversely be being affected as there will be shift from unemployment to employment
which can be due to going back to work, leaving school or college etc. there will be impacts of
such changes in the labour force work which will have impacts on determining the delivery
policies and number of jobs in labour force will; raise in the upcoming period.
Recently, the unemployment rate in Australia has been fell at 5.6% as there are 21000
losses from the full-time employment. Along with this, there have been increment in the part-
time employment which is of around 32600. Similarly, it affects a decline in the labour hour
which have ben reduced for 1.4% or it can be said around 24.2 million hours. However, it has
been estimated and predicted by various economists that Australia have slow employment
growth (Unemployment drops to 5.4 per cent despite the loss of 21,000 full-time time jobs in
May, 2018). The level of operations as well as labour force required for the work will have
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negative impacts on employment rates. Therefore, with respect to this, it is required that,
government needed to reframe the policies and bring reforms in the labour market. There should
be encouragement to the small medium size industries and rise in the number of jobs which will
help in balancing the economic conditions.
Question 2 Discussing the equilibrium process of moving a new macroeconomic equilibrium
output by implicating aggregate expenditures (AE)
The impacts of economic outputs over unemployment rates in Australia on which the
equilibrium has to built in between them. It will help country in sustaining appropriate economic
growth and revenue generation. Moreover, there have been consideration on overall process of
making operational efforts with the help of implicating aggregate expenditure model.
Figure 1 Keynesian Aggregate Expenditure Model
(Source: THE KEYNESIAN AGGREGATE EXPENDITURE MODEL, 2018)
Keynesian Aggregate Expenditure Model:
This model is drafted for analysing the aggregate expenditure based in consumption and
the level of input made in society (Kling, 2017). Therefore, in terms of analysing the economic
outputs and the unemployment rate there have various factors which are affecting the operations
such as consumption and price level. It includes investment, net exports, governmental purchases
etc.
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Planned Consumption expenditures:
The current income position of people in economy determined the purchasing per of the
individual. Therefore, the rise in disposal income will also affect increment in planned
expenditures (Aysun, Jeon and Kabukcuoglu, 2018). Additionally, it can be said that, there are
various impacts on the operational activities which in turn affecting the positive rise in the level
of expenditures made in economy. Rise in income level of citizens which have affected
increment in the purchasing power of buyers.
Planned Investment expenditures:
This includes expenditures which are mainly made in fixed assets, buildings, machineries
and raw material. Therefore, as per analysing the operation for the long run people made
investment in such sectors (Delis, Hasan and Mylonidis, 2017). It helps in securing the capital
funds for the longer terms and brings stability in their living standard.
Planned Government expenditures
Government mainly utilise funds in economic development. Policy making and
developing suitable schemes for development in society. Thus, changes in such planned policies
will also affect unemployment rates in environment. There can be impacts of changing tax rates,
exchange rates which affects the revenue generation of corporation or an individual.
Planned net exports:
The level of exports made by a country are needed to be more than the level of imports.
Thus, in respect with such factors which requires planning for enhancing exports as it will make
rise in revenue generation in economy (Allgood, 2017). However, inversely it will affect the rise
in the employment level as there will be increase in the large number of producer for
commodities. It will also lower the inflation rate along with recession.
Question 3 Implicating the use of AD-AS model to analyse the interest rates predicted by the
market economists.
AD-AS model reflecting initial impacts on output and price level
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Figure 2 Aggregate demand and Aggregate supply
(Source: Effects of Changes in AD, 2017)
In relation with determining the aggregate demand and supply of economy in accordance
with unemployment rates there have been use of various techniques and operational
determination. However, the fall in the unemployment rate in Australia in recent period which
determines that there have been rise in the GDP level. Thus, the main reason behind this fact is
that there have been increment in part time jobs in compared with full time employment. It
indicates the growth of employment opportunities in Country. There can be adequate increment
and development in per capita income of country. The rise in GDP will help nation in having
proper supplies of all resources. It reduces the dependency of a nation on another as well as build
capabilities for meeting demands.
On the other side, as per considering the increment in GDP rates there will be reduction
in the inflation rates. It is due to less dependency of nation on other in context with supplies of
natural resources. There has been qualitative rise in level of production as well as self-
dependency will enhance the employment too (Kenny, Lennard and Turner, 2017). Moreover,
due to such impacts there will be reduction in the inflation as well as fall in the prices of
necessary commodities. People will become able to retaining appropriate portion of their revenue
and make fruitful investment.
Moreover, there can be increment in the interest rates as per increment in the monetary
circulation which will affect higher deposits in banks. It will create opportunities to banks in
raising the revenue as per charging higher interest rates.
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Question 4 Applying the dynamic AD-AS model for analysing the circumstances for RBA in
raising the interest rates in next 12 months.
It has been predicted by various economists regarding a recent fall in the unemployment rate
will create the growth opportunities for the nation in next 12 months. Therefore, in this approach
it can be said that there will be rise in level of interest rates charges by RBA (Calomiris, and
et.al., 2017). However, increasing the interest rates will affect a rise in the income level as well
as brings stability in economy. There will be positive impacts on AUD in respect with USD
which insists a favourable currency value of nation.
Figure 3: Aggregate demand and Aggregate supply
(Source: Capital, 2018)
Therefore, a rise in interest rate will affect national economy as people start making savings
which affects less monetary circulation. However, as per considering the AD-AS model which
insist the monetary supply in the market is needed to appropriate and equal to demands
generated. It will help in making ongoing process of monetary transactions help in environment
as well as better employment opportunities for the young employees. Moreover, if RBA raises
the interest rate there will be benefits to government or banking institution for having higher
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revenue while it will affect the monetary policies of nation. However, changes in policies and
schemes will bring a suitable increment in the emplacement. The full-time employers may affect
the employment level in environment as there will be rise in the unemployment. In the recent
time a proportionate fall in unemployment rate which is due to rise in the part time job doers.
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REFERENCES
Books and Journals
Allgood, S., 2017. Report: Committee on Economic Education. American Economic
Review. 107(5). pp.752-58.
Aysun, U., Jeon, K. and Kabukcuoglu, Z., 2018. Is the credit channel alive? Firm-level evidence
on the sensitivity of borrowing spreads to monetary policy. Economic Modelling. 75.
pp.305-319.
Barro, R. J. and Furman, J., 2018. Macroeconomic effects of the 2017 tax reform. Brookings
papers on economic activity, pp.257-313.
Calomiris, C. W. and et.al., 2017. Establishing credible rules for Fed emergency lending. Journal
of Financial Economic Policy. 9(3). pp.260-267.
Clemens, C. and Heinemann, M., 2018. The effects of international financial integration in a
model with heterogeneous firms and credit frictions. Macroeconomic Dynamics, pp.1-
30.
Delis, M. D., Hasan, I. and Mylonidis, N., 2017. The Risk‐Taking Channel of Monetary Policy
in the US: Evidence from Corporate Loan Data. Journal of Money, Credit and
Banking. 49(1). pp.187-213.
Kenny, S., Lennard, J. and Turner, J. D., 2017. The macroeconomic effects of banking crises:
Evidence from the United Kingdom, 1750-1938 (No. 2017-09). QUCEH Working Paper
Series.
Kling, A., 2017. The Congressional Budget Office and the Demand for Pseudoscience. Yale Law
& Policy Review. 36(1).
Online
Capital. 2018. [Online]. Available through :<
https://friedmanseconomy.wordpress.com/tag/aggregate-demand/>.
Effects of Changes in AD. 2017. [Online]. Available through :<
https://www.atarsurvivalguide.com/effects-of-changes-in-aggregate-dem >.
Jobs boom puts RBA under pressure to raise interest rates. 2018. [Online]. Available through :<
https://www.afr.com/news/economy/employment-jumps-3-times-forecasts-keeping-
jobless-rate-at-54pc-20180719-h12vdp>.
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THE KEYNESIAN AGGREGATE EXPENDITURE MODEL. 2018. [Online]. Available
through :<
https://www.cengage.com/resource_uploads/downloads/1111970211_322429.pdf>.
Unemployment drops to 5.4 per cent despite the loss of 21,000 full-time time jobs in May. 2018.
[Online]. Available through :< https://www.abc.net.au/news/2018-06-14/employment-
and-unemployment-may-2018/9869002>.
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