At Its Meeting Today, the Board Decided to Lower the Cash Rate by 25 basis: Global Economy Assignment, OU, Australia

Subject Global Economy

Q1. Decision:

“At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.00 percent.”

Using the Statistical Tables on the RBA website, find data on monthly Money Market interest rates. (In Column B of the relevant spreadsheet you’ll find data on the Cash Rate Target: monthly average, starting from August 1990 to July 2019).

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Use this data to construct a graph of the monthly cash rate from August 1994 to July 2016. Use the graphing tool (line charts) in Excel. Describe the trend in the cash rate. How many interest rate changes have there been in this period?

 

Q2. Claim about economic indicators in advanced economies:

“In most advanced economies, inflation remains subdued, unemployment rates are low … .”

a) Collect and present (in line-graph format), annual data for the period from 2009 to 2018, showing the inflation rate, unemployment rate, and real GDP growth rate for Australia, The United States, and Japan. The required data can be found on the World Bank website.

Using the graphing tool in Excel, present, for each country, a line graph containing all three economic indicators. [The first graph will contain the three indicators for Australia. Likewise, the second line graph will show these for the USA, and the third line graph for Japan]. For each graph, you create, make sure you label each axis, give the graph a title, and reference the source of the data underneath the graph.

[Note: Please do not attach the excel file with your assignment. You don’t need to report numerical data, just need to present the line graphs. Please use copy/paste functions to transfer your plots to your assignment document].

b) What general trends do you observe in the three indicators for each country? Do the trends in inflation and unemployment confirm the RBA’s observations? Comment on the relationship between inflation, unemployment, and real GDP growth based on the data you observe.

Q3. Implications of slower Asian Growth for the Australian economy:

“The slowdown in global trade has contributed to slower growth in Asia…”
Why might the RBA be worried about the slower growth in Asia, especially, in China? Explain your answer using an Aggregate Expenditure — 450 line diagram. (You don’t need to use any real-world data to answer this question).

Q4. Claim about the effect of the interest rate cut.

“Over the year to the March quarter, the Australian economy grew at a below-trend 1.8 percent”. … “Today’s decision to lower the cash rate will help make further inroads into the spare capacity in the economy.”

Given the above statement, use an Aggregate Expenditure —450 line diagram to show the possible situation in Australia and to explain how the lowering of the cash rate may (or may not) help the Australian economy moving towards full employment.

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Q5. Sum up:

In your own words write a summary/conclusion about why the RBA decided to lower the cash rate in July 2019. Include consideration of how/whether the RBA’s actions matched their stated role. Refer to your graphs and analysis in Q1—Q4 to back your conclusion.

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