Unit Outline econ2210



Download 332.52 Kb.
Page4/6
Date conversion15.05.2016
Size332.52 Kb.
1   2   3   4   5   6

Tutorial 1: The Australian and world economies. Week beginning 14th March

Reference:


* Eslake, S. (2009). “The Global Financial Crisis of 2007-09, an Australian Perspective.” Economic Papers: 28:3: 226-38.

Consider the following information on growth, inflation, interest rates and the size of the economies in Australia and the US.

Figure 1

Real GDP Growth (% p.a.)


Country

Mean

S.Dev

AUS

3.28

1.71

US

2.84

2.14

AUS


US


Source: Reserve Bank of Australia www.rba.gov.au and US Bureau of Economic Analysis www.bea.gov.

Figure 2

Inflation (% p.a.)


AUS

US


Country

Mean

S.Dev

AUS

4.53

3.16

US

3.38

1.92


Source: IMF International Financial Statistics (CD-ROM) 2004 and Reserve Bank of Australia www.rba.gov.au


Figure 3

Target Policy Interest Rate (% p.a.)


AUS

US

Notes:

1. For Australia: before January 1990, the interest rate is the average overnight interest rate on the money market. Thereafter, this is the official target cash rate.



2. For the USA: the interest rate is the federal funds rate.

Source: IMF International Financial Statistics (CD-ROM) 2008 and Reserve Bank of Australia www.rba.gov.au


Table 1

Size of the Australian and US Economies




Country

GDP in 2009 (billions)

Population

GDP per capita in 2009

$A

$US

(millions)

$A

$US

Australia

1,253

993

22

57,261

45,393

US

17,987

14,259

307

58,587

46,444

US/Aus

14.36

14.36

14.03

1.02

1.02

Notes: Currency conversions based on 0.79 USD/AUD, which is the average exchange rate in 2009. The GDP figures are nominal 2009 estimates.


Sources: Australian Bureau of Statistics, Reserve Bank of Australia, US Census Bureau and US Bureau of Economic Analysis.

Questions

1. What is usually meant by the term recession? Why do both the US and Australia go into, and come out of recessions at similar times? Do the same catalysts trigger recession and recovery in both countries? If so, what are these catalysts?

2. During the 1980s, inflation in Australia was much higher than in the US, but in the last two decades they have been much more similar. Why?

3. In his Shann Lecture, what reasons does Eslake (2009) give for Australia’s resilience to the recent Global Financial Crisis?

4. How much larger is the US economy than that of Australia? How much richer, on average, are Americans than Australians? What qualifications need to be made?

5. Let real GDP in year t be given by and its initial value be. Suppose real GDP, Y, grows at λ% each year. Then:

(1)

Show that it will take roughlyyears for GDP to double. This useful result is known as “the rule of 70”.



Hint: If GDP doubles by year T, then . Use this and the rule that

to solve for T.

6. In 2009, Australian GDP was roughly 993 billion US dollars while American GDP was 14,259 billion USD. Suppose real GDP grows at 3.2% p.a. in Australia and 2.8% in USA indefinitely. Using the equation (1), how long would it take until Australia’s GDP surpasses that in the US? You should solve the problem algebraically and check your answer using Excel. Make a graph of the natural log of GDP against time for both countries. What are the slopes of these graphs?


1   2   3   4   5   6


The database is protected by copyright ©essaydocs.org 2016
send message

    Main page