ECON202: Open-economy Macroeconomics assignment sample NZ

In this open-economy macroeconomics assignment, you will be exploring how global factors affect a country's economy. You will be looking at two countries and analyzing their economic performance. This is an important topic to understand as we continue to the globalization of economies.

The open-economy macroeconomic model consists of a continuum of goods and services, called the production possibility frontier (PPF), along which firms can produce any combination of goods at varying levels of output. The PPF slopes downwards because as one moves away from consumers, the demand for each good declines until it becomes zero at either end. An economy's production possibilities frontier is drawn to represent its maximum feasible output level for each type or "class" of good in order to show how total output may be split between different classes when there are no constraints on resource use imposed by other sectors or countries.

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Get Solved Assignment Sample For (ECON202) Open-economy Macroeconomics Unit

This unit will increase your students’ knowledge and understanding of the subject. The following are some tasks that will be answered in this unit:

Assignment Task 1: Describe the interdependent nature of key macroeconomic variables and markets, and the dynamics of responses to economic shocks.

The interdependent nature of macroeconomic variables and markets is highlighted by the fact that changes in one variable can lead to changes in other variables. For example, an increase in unemployment will lead to a decrease in GDP, because people who are unemployed don't have income from which they can buy products or services. This relationship between macroeconomy variables has important implications for policy responses to economic shocks--for instance, when oil prices spikes due to events like war or terrorism it may be necessary to adjust both consumption (i.e., gasoline) and production (oil fields) so as not put too much stress on our limited resources such as oil reserves; otherwise, we risk creating inflationary pressures if we maintain high levels of consumption while cutting back on production or importing oil.

Assignment Task 2: Analyze goods and financial market behavior in the basic and extended IS-LM models.

The IS-LM model is a macroeconomic model that shows the effects of money supply, interest rates, and government spending on aggregate output in the economy. The basic version of this model has two curves: an investment curve I(K) and a consumption curve C(K). These curves show how much money is being spent on capital (investment) versus current expenditures (consumption).

The LM curve shows how much total production will change for each possible level of Aggregate Demand (AD) at any given level of Aggregate Supply (AS). This slope determines whether an increase in AD will lead to an increase in GDP or not. If positive, then more economic activity occurs with higher levels of AD. If negative, then less economic activity occurs with higher levels of AD.

The extended version of the model includes a Government Spending (G) curve and a Foreign Sector (F).

Assignment Task 3: Analyze the supply side of a macroeconomy: the labor market, wage setting, price determination, natural rates of unemployment.

The supply side of a macroeconomy refers to factors that influence the level of output in an economy. The labor market, wage-setting mechanism, and price determination process are all components on this side of macroeconomics.

Natural rates of unemployment represent the lowest levels at which unemployment can exist without creating inflationary pressures due to excess demand pressures from either households or businesses for goods and services. When these natural rates drop below what is considered 'full employment the point where there are no longer enough willing workers available to meet employer demands then we start seeing rising levels of inflation as unemployed people begin spending their time looking for jobs instead of working hard at their current job so they can save money for when they need to look for new jobs.

Assignment Task 4: Analyze the IS-LM-PC model with natural output levels, and use it to explain the dynamics of responses to demand-side and supply-side shocks.

In particular, it allows us to see how changes in output and prices are related to movements in interest rates and real output. In addition, the model can help us to understand the impact of various policy interventions on the economy.

For example, suppose there is a recession and demand for goods falls. This will cause a decrease in output and an increase in unemployment. The LM curve will shift leftward, from LM1 to LM2, as people save more money and banks become more cautious about lending money. This will cause interest rates to rise, from r1 to r2. This will cause a movement from A to B in the IS-LM model, with a decrease in output and an increase in unemployment.

What if the government responds by increasing spending on public works? The G curve shifts rightward from G1 to G2. In this case, aggregate supply does not change because nothing is being done to expand or contract potential output. Aggregate demand, however, increases from AD1 to AD2. This will cause a movement from C to D in the IS-LM model, with an increase in output and a decrease in unemployment.

Assignment Task 5: Understand how expectation affects consumption, investment, and output.

When it comes to consumption, expectations can play a huge role in how much someone enjoys something. For example, if you go into a restaurant expecting to have a terrible meal, you're likely to find ways to justify that belief and end up having a bad time. However, if you go into the same restaurant expecting great food, you're more likely to be pleased with the experience and enjoy your meal.

The same is true for investments. When people expect good returns on their investment, they're more likely to be satisfied with the results. However, when people expect poor returns or even losses, they're usually less happy with what they receive. Finally, expectations also affect output. When people are expecting good results, they're more likely to work hard and produce a lot. However, when people expect bad results, they're less likely to put in their best effort.

Assignment Task 6: Explain the interactions of interest rates and exchange rates.

Interest rates and exchange rates are inversely related. That is, when one goes up, the other goes down, and vice versa. This makes sense because investors will want to hold onto their money in order to get a better return on it so they can invest elsewhere or just take precautionary measures against inflation which is what happens when prices rise too quickly. If you're wondering how this relates to loans then think of investing in stocks versus buying them on margin - with stocks being risky but an investment with high potential returns while debt has lower risk but also low potential returns (though not always). This means that people will want to invest their money in safer assets. This causes the interest rate on these assets to go up while simultaneously causing the exchange rate for those currencies to decrease due to less demand which decreases the value of foreign investments - instead, they'll be focusing on domestic ones because they're looking for a better return.

Assignment Task 7: Assess the pros and cons of alternative exchange rate regimes, and explain how they provide different adjustment mechanisms for domestic and external economic shocks.

The pros of alternative exchange rate regimes are that they can provide different adjustment mechanisms for domestic and external economic conditions. For example, suppose the economy is experiencing too much inflation due to an inflow of capital, then an appreciation in the currency would reduce imports and restore price levels to normal. On the other hand, if our country has a current account deficit because we're importing more than we're exporting, then a depreciation would make our exports cheaper abroad and bring down our import bill. In this case, there may not be any significant change in terms of employment or GDP growth initially but at least there's some hope for containing inflation by means of adjustments within the economy rather than through some outside event such as interest rates changing.

The cons of alternative exchange rate regimes is that this may cause unnecessary volatility. For example, governments may be too quick to change the value of their currencies and may even impose capital controls in order to keep foreign investment flowing. Because we're not an isolated economy (trade plays a huge role in our prosperity), such actions could interfere with international trade and hurt growth. In addition, this could create more uncertainty about the future of a country's currency.

Assignment Task 8: Analyze the effects of monetary and fiscal policies and understand their limitations.

Monetary and fiscal policies are the two main types of economic policy. Monetary policy is the management of the money supply and interest rates, while fiscal policy is the use of government spending and taxation to influence the economy.

Monetary and fiscal policies can be used to achieve different goals, such as low inflation, full employment, or economic growth. However, they also have limits, and it's important to understand these limits in order to make sound decisions about when and how to use them.

For example, monetary policy can be used to stimulate the economy by lowering interest rates or increasing the money supply. However, it can only do so up to a point - if interest rates are lowered too much or the money supply is increased too much, this can lead to high inflation and unbalanced growth.

Fiscal policy can be used to control the rate of economic growth by increasing or decreasing government spending. However, if taxes are increased too much or not enough (or decreased), they could lead to imbalances in the economy such as deflation and unemployment.

In order for both policies to work well, it's important that they have a clear target and be used at the appropriate time. In addition, careful consideration of costs and benefits is necessary in order to minimize risks and maximize benefits.

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