(a) The Central Bank within the economy reduces interest rates.
The central bank reducing the interest rates results in an increase in the money supply in the market which has ripple effect on the loans. People can easily access loans resulting in an increase in the investments present in the country. This will result in the decrease in unemployment levels resulting in the shift of the AD1 curve to the right AD2.This will result in the increase in the real GDP from Y1 to Y2.
(b) There is an increase in private domestic investment spending.
An increase in private domestic spending will result in an increase in the demand of commodities in the market resulting in the shift of AD1 to AD2 which will have a positive impact on the real GDP sine it will result in its increase from Y1 to Y2.
(c) An increase in international oil prices.
An increase in international prices of oil will result in the prices of commodities increasing to accommodate the increase. This will result in a decrease in the commodities demanded resulting in the decrease of the GDP from Y1 to Y2.
(d) Depreciation in the foreign exchange rate value of the economy’s currency.
Depreciation in the foreign exchange rates of the country does results in the products of the country being affordable to the outsider and the country in ability to purchase the products from outside since they are expensive to the inhabitants. In the short run the prices of exports will be costly restraining due to the increase in price and this does result in the d...
2.The fall in the seasonally adjusted measure was a surprise to financial traders who had been expecting a higher rate, one that would make it more likely for the RBA to cut interest rates next month. This set currency exchange dealers into a frenzy, sending the value of the Australian dollar to rise to around half a cent in under a minute.
But that frenzy did not change the market’s long term view on interest rates. The market continues to expect the RBA to cut rates this year – indeed it is now more certain of a rate cut than it was before the unemployment figures came out.
And certainly, there wasn’t a lot in the unemployment figures to get too excited about once you sat back and had a cup of tea and a Tim Tam biscuit to calm down.
Because the seasonally adjusted rate is prone to jumping up and down a bit from month to month, the ABS says you should treat such monthly movements “with caution”. And given the drop in December was the biggest monthly change in almost two years, it is better to wait for a month or two to see if it was just a bit of statistical noise or the sign of the corner being turned.
Moreover while a fall in the unemployment rate is to be welcomed, the reality is it is currently harder to get a job than any time in the past decade – even harder than dur...