Macroeconomics: What is the effect of an increase in domestic saving on the current account, investment and interest rate in both the domestic and foreign economies?
Aim: The purpose of assignments is threefold. Firstly, they provide a means of assessing student performance. Secondly,
assignments generate feedback, thus enabling you to monitor your performance. And thirdly, assignments afford students
the opportunity to reflect on the material covered in the course and, in the case of essays, invite a more detailed study of a
particular topic. The assignment for ECON102 is compulsory for all students.
You are required to answer ALL questions below.
What is the effect of an increase in domestic saving on the current account, investment and interest rate in both the
domestic and foreign economies?
According to the Treasurer, Mr. Joe Hockey, the 2014 Budget was designed to reduce the deficit but increase
employment. Why would such a policy not fit well in the income–expenditure analysis? Explain in words, and illustrate
graphically, how such a policy might achieve the desired effect.
Based on your knowledge, pick one policy undertaken by the Australian government or the Reserve Bank of Australia in
response to the 2008 Global Financial Crisis (GFC). Explain the policy action and the rationale behind the policy. Also,
discuss briefly a possible criticism of the policy action.