Introductory Macroeconomics

ECON10003 Introductory Macroeconomics
Semester 2, 2013
Assignment 2

This assignment is worth 10% of your overall mark for this subject.

The question is designed to assess your knowledge and understanding of the aggregate demand – aggregate supply framework.

The assignment is due by 4pm, Monday October 7.
You will need to submit your assignment in electronic format to the Commerce Student Centre via the Assignment Submission Tool. You can access the Assignment Submission Tool by clicking on Assignment Tool in the navigation menu from the LMS page for this subject.
The following details are very important:
o Keep a copy of your assignment
o Plagiarism or other forms of academic dishonesty may result in discipline proceedings being brought against you.

The Assignment

“Since November 2011, the Reserve Bank has lowered the cash rate on eight separate occasions from 4.75% to 2.5%. Clearly, the Bank has become far less concerned about inflation and is giving a much greater emphasis to unemployment in its policy reaction function”
(South Western Tasmania Weekly News 3 September, 2013)

In the light of the quotation, assume that the economy is in long run equilibrium when the Reserve Bank of Australia decided to raise its inflation target and give greater emphasis to unemployment in its policy reaction function.

Use the aggregate demand – aggregate supply curve framework and the Reserve Bank’s policy reaction function to explain this process and consider the likely consequences for the macro economy in both the short-run and the long run.

That is, explain the effect of this change in policy by the Bank on real GDP, unemployment and the rate of inflation in both the short – run and the long – run.

What will be the effect of this change in policy on both the real and the nominal interest rate in the long – run?

USE NO MORE THAN 1000 WORDS IN TOTAL (EXCLUDING FOOTNOTES, TABLES AND BIBLIOGRAPHY).

The Assignment Submission Tool

All assignments must be submitted electronically using the Assignment Submission Tool. You can access this facility from the TLU Tools menu bar on our LMS page. You are able to submit either a Microsoft Word or PDF file. It is a very straightforward process and you will be guided by prompts. Please consult http://tlu.ecom.unimelb.edu.au/pdfs/StudentsGuideAssignmentTool.pdf for more information.

There are two points to take particular note of:

1. Please provide the following information on a cover sheet that will be the first page of your assignment
• Your name and student number
• Your tutor’s name and your tutorial time

2. All submissions will be scanned by academic honesty software. This means that you must be very careful to adhere to the Department of Economics’ academic honesty policy. Breaches of this policy, such as failing to reference sources, or plagiarism, will result in action being taken. A copy of this policy is provided on page 5 of this handout.

University Policies on Late Submission and Word Limits

Assignments that exceed the word limit by more than 10% may attract a marking penalty of 10% of the marks that would otherwise have been awarded.

Assignments that exceed the word limit by 25% or more may attract a higher penalty, including a cap on the maximum grade awarded, unless a student gains an exemption.

Late submissions must be requested from the Commerce Student Centre. Late assignments, where approval for late submission has not been given, will be penalised at the rate of 10% of the total mark per day, for up to 5 days, at which time a mark of zero will be given. For details see:
http://fbe.unimelb.edu.au/__data/assets/pdf_file/0011/647345/Assignment_Extension_Guidelines.pdf
Referencing
All sources used for a written piece of assessment must be referenced. This is to acknowledge that your material is not based entirely on your own ideas, but is based, in part, on the ideas, information, and evidence of others. This is desirable as you are attending University in order to learn from others.
You will be required to use the APA system or Harvard System of referencing. The CELT has prepared a booklet for each system specifically to assist students to reference correctly. Each booklet contains many examples that will help you when preparing your assignments. The booklets can be found here:
http://fbe.unimelb.edu.au/__data/assets/pdf_file/0006/647583/Basic_referencing_APA_system.pdf

http://fbe.unimelb.edu.au/__data/assets/pdf_file/0007/647584/Harvard_Referencing.pdf
It is important that all material you present for assessment is referenced correctly. Material that has not been referenced correctly may be considered to be plagiarised, and as such may be penalised. We will also look for evidence that material included in the bibliography has been used in the assignment. Including references that have not been used may also result in your assignment being penalised.

Academic Honesty

It is the policy of the Department of Economics that attention is drawn to the nature and serious consequences of cheating and plagiarism.

Any student who copies from or otherwise uses the answer of any other person engaged in the performance of the same or comparable component of assessment or permits any other person to copy from or otherwise use his or her answer shall be deprived of credit for the whole or part of any assessment within that subject or disciplined in some other way.

In this regard your attention is drawn to Rule 3 of the rules made by the Council of this University pursuant to Statute 12.2.10. The following may be regarded as evidence of an infringement of that Rule:

a) the submission of an answer substantially similar to that submitted by a student in the same or any preceding year, whether at this University or any other institution;
b) the submission of an answer not based substantially on the student’s own work (or, in the case of joint work, not based on the work of those named as having done the joint work herein); or
c) the submission of an answer containing substantial quotations from another work (whether in the same words or in some variation thereof) without appropriate reference to the source.
Students should note that Rule 3 applies also to the student whose answer is copied. There is no objection to assignments being discussed in a preliminary way among students. What is not permissible is anything in the nature of joint planning and execution of any assignment assessable task.

Collusion is the presentation by a student of an assignment as his or her own work when it is, in fact, the result (in whole or in part) of unauthorised collaboration with another person or persons. Both the student presenting the assignment and the student(s) willingly supplying unauthorised material are considered participants in the act of academic misconduct.
See http://www.services.unimelb.edu.au/plagiarism/plagiarism.html for more information.
The CELT has developed a web-based ‘Academic Honesty Module’ that allows you to learn more about and test your knowledge of plagiarism and collusion. You are strongly encouraged to complete this module, which can be accessed at:
http://fbe.unimelb.edu.au/celt/tools/faculty_guidelines/plagiarism_and_academic_honesty

You should also consult the section on Plagiarism and Collusion contained in