ACCT2542

ACCT2542 - Q 25: discuss the impact of the current stance...

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Q 25: discuss the impact of the current stance of monetary policy on the level of inflation and economic growth in the Australian economy. Intro: 1. What is monetary policy? What are the impacts of monetary policies on the levels of inflation and economic growth? Simple sentences will do here Body: 2. What is monetary policy? Who implements it? How is implemented? Why is it implemented? 3. When will the monetary policy be implanted? 4. What effects are there from the implementation of monetary policy? 5. Current statistics and trend? Conclude: 1. - Monetary policy is a government macroeconomic policy, which uses the level of interest rate to influence the level of economic activity by Reserve Bank of Australia, hence stabilize the Australian economy. Recently, monetary policy is at contractionary stance. RBA keeps the interest rate high at 4.75% to slow the economy activity, in response to the resource boom in the mining sector. It plays an important role in controlling the level of inflation and maintaining a sustainable economic growth. - Inflation refers to prices rising over a period of time. In the early 1990s, government set target band of inflation, 2-3% over the course of business cycle. Inflation rate is measured by consumer price index. They are four types of inflation, i.e. demand inflation, cost inflation, imported inflation and inflationary expectation. Currently, the contractionary monetary policy reduces inflationary pressures. High interest rate reduces the demand in the economy. Because of commodity boom, economic activity is high, which increases the inflationary pressure. RBA keeps the interest rate high at 4.75% since June 2010 in order to control the inflation rate. - Economic growth refers to the increase in the real value of goods and services produced in the economy over a period of time. Aggregate demand is an important factor of economic growth. Aggregate demand=consumption+investment+government expenditure+net export
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ACCT2542 - Q 25: discuss the impact of the current stance...

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