UNIVERSITY OF SOUTH AUSTRALIA

SCHOOL OF COMMERCE
&
OUA
ECO12 (MACROECONOMICS 1)
STUDY PERIOD 2, 2014
ASSIGNMENT 2

Vandana Arya
Teaching Assistant
School of Commerce
University of South Australia

ECO12 Macroeconomics 1 SP2 2014 Assignment Booklet Page 1 of 6

ASSIGNMENT 2: APPLIED WRITING

Weighting:

20%

Requirement:

Answer the questions relating to a newspaper article

Word limit:

2500 words

Due date:

Week 9 Monday 28 July 2014 at 9am SA time.

Submission method

Details will be available on the unit Learn Online site

INSTRUCTIONS:
Read the following excerpts from the article Economy too weak for deep cuts by
David Uren published on May 07 2014 and answer all the questions. You are
expected to use graphs to explain your answer.

Economy too weak for deep cuts

By David Uren; From The Australian May 07 2014

SAVINGS in next weeks budget will be much smaller than expected, with Joe Hockey likely
to argue that the economic outlook is too weak to sustain large cuts.
The OECD said last night that Australia should avoid concentrating too much of its budget
savings on the year ahead, with the economy facing uncertainty because of the expected
downturn in resources investment.
Because of this uncertainty, heavy front loading of fiscal consolidation should be avoided,
it argues.
The OECDs commentary has been prepared after close liaison with Treasury and is
understood to closely reflect the views of the Treasurers department.
The OECD believes a pick-up in consumer demand and housing construction will offset
declining investment in the resources sector, but it says unemployment will not start to drop
until the second half of 2015.
The Reserve Bank yesterday left the official cash rate at a record low of 2.5 per cent for the
ninth consecutive month. Governor Glenn Stevens said there was moderate growth in
consumer demand, with building approvals foreshadowing a strong expansion in housing
construction.
He said low rates should assist growth, and inflation was expected to remain under control
for the next two years.
ANZ economists expect that the record shipments of coal and iron ore will help exports
contribute 0.75 percentage points to economic growth in the March quarter. This would
result in trend growth even if the rest of the economy were at a standstill.
The OECD remains optimistic about Australias long-term outlook, saying it should be able to
achieve growth of 3.2 per cent a year over the next 15 years compared with an OECD
average of 2.2 per cent. Its productivity growth should lift from 1.2 per cent over the past
five years to an average of 2 per cent out to 2020.

ECO12 Macroeconomics 1 SP2 2014 Assignment Booklet Page 2 of 6

Questions:
1. Use the Aggregate Expenditure model to explain the OECD concerns
regarding the possible effect of the Federal governments budget cuts
on the Australian economic output. In your answer make sure to
discuss what components of aggregate expenditure are a source of
concern and why.
[7 marks]

2. Use the Aggregate Demand(AD)/Aggregate Supply(AS) analysis to

explain the Reserve Banks prediction of moderate growth of the
Australian economy in the context that inflation was expected to
remain under control.
Make sure to explain why AD is expected to change and use your
diagram to show the importance of the shape of the AS curve and the
positioning of initial output equilibrium in interpreting the Reserve
banks statement of moderate growth with little inflation.
[8 marks]

3. Use the AD/AS model to show the long run implications for economic
output of the OECDs prediction that productivity in Australian is
expected to lift over the next 6 years.
[5 marks]

Total = 20 marks
Provide adequate referencing. Failure to cite properly is evidence of academic
misconduct and will result in marks being deducted.
No submissions will be accepted after Monday 11 August 9am SA time.
There will be no re-marking or re-submission of the assignment. If you require an
extension, you will need to fill in the form available on the unit website and make
an application for an extension to the unit coordinators by email to
cmr_oua@unisa.edu.au.
Late assignments that do not have approved extensions will incur a penalty. In
accordance with the Division of Business guidelines, assignments submitted late
without permission from the course coordinator/s will attract a penalty of 10% of
the total possible marks for the assignment per day for each day late, or part
thereof, after the due date. Assignments more than seven days late without an
approved extension will not be marked.

ECO12 Macroeconomics 1 SP2 2014 Assignment Booklet Page 3 of 6

SUBMISSION AND RETURN OF ASSESSMENT PIECES

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Please attach the below assignment cover sheet to your assignment. Make sure
you include your ID number.

Include your FULL NAME AND ID on the first page of your assignment

Number the pages of your assignment.

Include the word limit on the bottom of the first page.

Additionally, assignments are NOT, under any circumstances, to be submitted

by email. This bypasses the assignment tracking systems set up by the School of
Commerce and increases the chances that your assignment will be lost.

ECO12 Macroeconomics 1 SP2 2014 Assignment Booklet Page 4 of 6

OUA Assignment Cover Sheet

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The attachment of this statement on any electronically submitted assignments will be deemed to have the same authority as a
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Assignment details
Unit code: ECO12

Unit name: Macroeconomics 1

Assignment no.2

Due date: 28 July 2014 9am SA time

th

Assignment topic (as stated in the Unit outline):

Student Declaration
I declare the work contained in this assignment is my own, except where acknowledgement of sources is made.
I authorise the University to test any work submitted by me, using text comparison software, for instances of plagiarism. I
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ECO12 Macroeconomics 1 SP2 2014 Assignment Booklet Page 5 of 6

Assessment feedback form

ECO12Macroeconomics 1 (2014)

Assignment 2

Name_______________________ Number____________________

Key components of this

assignment

Performance on this component

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Poor

Comment
Very Poor

Demonstrate effective use of some

of the fundamental methods and
tools of economics.
Apply elementary economic
principles and models in a new
context.
Effective communication using
appropriate economics terminology
and models (usually in the form of
diagrams) which are incorporated
into your discussion.
Presentation and structure.

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This form meets the 2014 requirements of UniSAs Code of Good Practice: Student
Assessment

ECO12 Macroeconomics 1 SP2 2014 Assignment Booklet Page 6 of 6