This
assignment is based on an article published in the Economic Focus section of
The Economist Magazine called .The Global Slumpometer., November 6,2008. The article is already attached to this assignment question. Please read the article arefully before attempting this exercise. You will also need to draw on other resources available through the library as well as external resources to answer these questions.
Questions: Answer all questions. Limit the word count of your assignment to less than 3000.Please use diagrams in your answer when appropriate.
1. In light of the recent turmoil in global financial markets, many countries have implemented.rescue. packages for ailing financial institutions. Does this mean that Adam Smith.s .invisiblehand. view of the economy is now redundant? Discuss.
2. The article suggests that the downturn will impact the wealthier countries more than poorer nations. Will this recent crisis impact all developing countries in the same way? Research and analyse.
3. Recently, the Australia government has unveiled measures aimed at insulating Australia from the fallout of these global events. Using the AS/AD model, analyse the intended effects of these fiscal measures. What should be the role of monetary policy given these events?
4. The value of the Australian dollar has declined during this crisis, even though our economic fundamentals are better than most countries. Discuss the likely causes of our currency.s depreciation.
5. Briefly discuss the likely effects of these global events on....(i) the Australian retail sector (ii) the Australian housing market (iii) the Australian mining industry.
The global slumpometer
Nov 6th 2008
From The Economist print edition
Rich countries face their deepest recession since the 1930s. For poorer nations it could still be relatively mild
MANY economists are now predicting the worst global recession since the 1930s. Such grim warnings discourage spending by households and businesses, depressing output even more.It is unfortunate, therefore, that there is so much confusion about what pundits mean whenthey talk about a .global recession..
America, Britain, the euro area and Japan are almost certainly already in recession
according to the popular rule of thumb of two successive quarters of falling GDP. But is theR-word really justified for the world as a whole? In an updated World Economic Outlook,published on November 6th, the IMF predicted that world GDP growth would fall to 2.2% in2009, based on purchasing-power parity (PPP) weights, from 5% in 2007 and 3.7% in 2008.In the past, the IMF has said that global growth of less than 3% implied a world recession,so its latest forecasts would push the world over the edge. Some forecasts by private-sectorfirms are even gloomier, with several now predicting global GDP growth of no more than1.5% in 2009.