You are required to prepare a research essay for the following questions. All answers must be explained with the use of diagrams (where possible). Responses must be in essay form as three separate answers of total length of between 1500 to 2000 words (in your own words). References required where necessary.
1. Describe how fluctuations in the level of aggregate demand can be impacted by the level of leakages and injections into the economy. Particularly consider how they influence the size of the multiplier in determining the level of Aggregate Demand. Relate your answer to our current economic situation during 2017.
2. What is the likely impact of the proposed fiscal policy changes of the Federal Government on the level of aggregate demand in the economy? Consider the short and long term implications?
3. What is the current trend in our Terms of Trade and how does this affect our level of economic activity? Discuss the major international influences on our trading position and how significant is its impact on Australia’s economic growth.
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This paper analyses the Australian economy from the macroeconomic perspective of injections and leakages into the circular flow of the economy and how it affects the expenditure multiplier to bring about generation of increase in aggregate output. It also discusses the fiscal policy of the current government in Australia and how increases in infrastructural investments can boost the economy. Lastly it also identifies the terms of trade for the economy and how it has become more open to the international exports and imports in the recent years.
Injections and Leakages into the circular flow of income:
The circular flow of income in an economy describes the injections and leakages in to the various sectors the economy and it's an alternative to explain aggregate production- aggregate expenditure model of any economy. There are three uses of income which are non-consumption uses and are grouped as leakages from an economy; These 3 are the savings, taxes & imports. These three are called leakages as they leak out of the circular flow of income, consumption and production in an economy....
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