Inflation and Job Creation Policies †MyAssignmenthelp.com

Question: Discuss about the Inflation and Job Creation Policies. Answer: Introduction Stability in an economy refers to a stable condition in different macroeconomic indicators. For any single market, equilibrium is ensured by the demand and supply condition in the market. Once equilibrium is determined in the market demand and supply forces interact to maintain stability. The operation of price mechanism as an invisible hand restores equilibrium. The concept of microeconomic stability is needed to understand macroeconomic stability. However, it macroeconomic stability should analyzed with a broad spectrum. In this paper, economic stability of Australia is discussed under the purview of indicators such as gross domestic product, inflation, unemployment and external stability. Stability symbolizes a resting state that can be restored without any exogenous forces. The adjustment of stability is best understood in terms of microeconomic stability in terms of supply and demand forces. The equilibrium outcome from the above figure is obtained as P* as equilibrium price and Q* as equilibrium price. Consider price revised upward to P1. At an increased price, demand decreases while supply increases. An excess supply resulted from this fact. The excess supply will be absorbed only when there is a reduction is price. Therefore, price starts falling. This will continue unless price reaches to the original equilibrium position P*. Conversely, the adjustment is opposite when price falls below the equilibrium price say at P2. At the price an excess demand is resulted from the fact that demand at this price exceeds its existing supply (Zinn et al., 2016). To cut the demand price has to be increased from P2. Therefore, price again moves towards equilibrium price. This explains why E is a stable equilibrium point. Any deviation from E moves back to this point without any intervention. The stability adjusts is autonomous. The aspect is broad when the overall economy is concerned. The demand and supply forces considered here are the forces of aggregated demand and aggregate supply. Aggregate supply is summation of expenditure in an economy. In captures the overall demand of the economy. It is also considered as planned expenditure. Aggregate supply represents actual expenditure of the economy. Government intervention and health of the economy Stability for the economy as a whole needs consideration on a broad spectrum. The forces of aggregate demand and aggregate supply cannot always maintain economic stability autonomously. In this situation, government policy intervention becomes necessary. Government has two major policy tools to intervene in an economy. One is fiscal policy instrument and other is monetary policy instrument. Fiscal policy uses tools of direct taxation or government spending to affect GDP of the economy (Goodwin et al., 2013). Monetary policy tool is used for maintaining stability of the price level. Monetary policy works using through adjustment available money supply. Government uses other stabilization instrument to maintain stability in the economy. Australia is a market dependent economy. There is no centralized planning following which economic activities are guided. Major decisions are taken in the economy in the marketplace through interaction of demand and supply forces. Australia engages in international affairs thorough trade, investment and other transaction (Groenewegen McFarlane, 2014). Hence, stability for the external economies also matters for Australian economy. GDP stands for representing market values of goods and services in an economy. The goods and services produced within the economy is computed using the market value of goods and services produced. In Australia, Australian Bureau of Labor statistics computes GDP statistic (rba.gov.au, 2017). A stable GDP implies stability for the economy. However, GDP is not a complete measure of well being. Still it is considered as a primary determinant factor of stability. From the above GDP statistics, a stable trend in GDP is obtained for the last ten years. GDP grows overtime in Australia, which implies stability in income and other related indicators. As mentioned earlier GDP alone cannot give complete scenario of the economy. Therefore, other indicators need to be evaluated. One such important indicator is unemployment statistics. The division of working age population in Australia is given in the following flow chart. The problem of unemployment substantially reduced overtime. Unemployment rate peaked up in 2009, partly due to global recession in 2008. After that, unemployment remains almost stable (Gregory Smith, 2016). People in Australia remain unemployed for a comparatively for a short time period. Approximately 60 percent of workforce those remain unemployed was unemployed for less than six month. Nearly 44 percent was unemployed for less than 13 weeks. Overall stability of the economy is measured in terms of inflation trend. Fluctuation in the price level indicates unstable condition for the economy. Australia is successful in maintain a stable state of price level. Inflation rate reduces gradually and remain at a moderate to low level (worldbank.org, 2017). Automatic stabilizer and Discretionary stabilizers are used for maintain stability in the crisis period. Automatic stabilizers are developed using direct tool of direct tax or government spending. However, Automatic stabilizers do not have direct influence on federal policy structure. Discretionary stabilizers are intensive measures for maintaining stability. Government here introduces new types of tax or makes some significant changes in its policy framework. Conclusion The report aimed at conduction a research analysis on economic stability and particular areas of government intervention for maintaining for maintaining a good health of the economy. Microeconomic stability is restored with the adjustment of price mechanism. In case of macroeconomic stability, aggregate demand and aggregate supply are considered and government often actively intervenes to maintain stability of the economy. Particular focus is given on the Australian economy. Australia maintains a stable state in its GDP, inflation and unemployment level. Moreover, there are stabilization instrument to maintain stability for Australian economy. References Australia Inflation Rate | 1951-2017 | Data | Chart | Calendar | Forecast. (2017).Tradingeconomics.com. Retrieved 23 September 2017, from https://tradingeconomics.com/australia/inflation-cpi Current Price Gross Domestic Product in Australia. (2017).Fred.stlouisfed.org. Retrieved 23 September 2017, from https://fred.stlouisfed.org/series/AUSGDPNQDSMEI Goodwin, N., Nelson, J., Harris, J., Torras, M., Roach, B. (2013).Macroeconomics in context. ME Sharpe. Gregory, R. G., Smith, R. E. (2016). 15 Unemployment, Inflation and Job Creation Policies in Australia.Inflation and Unemployment: Theory, Experience and Policy Making, 325. Groenewegen, P., McFarlane, B. (2014).A History of Australian Economic Thought (Routledge Revivals). Routledge. Measures of Consumer Price Inflation | RBA. (2017).Reserve Bank of Australia. Retrieved 23 September 2017, from https://www.rba.gov.au/inflation/measures-cpi.html Unemployment, total (% of total labor force) (modeled ILO estimate) | Data. (2017).Data.worldbank.org. Retrieved 23 September 2017, from https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?end=2016locations=AUstart=2005view=chart Zinn, J., Arjomand, L., Finlay, N., Kheirandish, R., Solomon, G. (2016). Principles of Microeconomics.