RBA Decrease Rates for Christmas Essay Example | Topics and Well Written Essays - 1750 words

RBA Decrease Rates for Christmas - Essay representativeThe economy is made up of various components and each and every single component simulates the economy differently. In the explanation and analysis of the RBA Decrease Rates for Christmas article, a number of economic components are considered. These components aid intense analysis of the article based on the context of actions taken by the RBA, Central Bank and the economic responses experienced in the financial markets and the economy at large. immix beseech and supply plays a primal role in the economy, determining the overall level of performance of the economy1. Unemployment and pretentiousness are key determinants of the forethought that the economy takes and they both affect decisions made within the economic context. Monetary policy on the an early(a)(prenominal) hand is undertaken by the Central Bank as a measure to manage the economy aboard fiscal policy. The two measures are crucial in managing currency trend s that further determine the level of inflation in the economy. Analysis in the Context of Economic Concepts/Theories Aggregate demand and Supply The economic poser is made of different sectors and industries. Each constituent sector or industry contributes towards the overall welfare of the economy. Aggregate demand and supply denotes the entire economys output. ... Aggregate demand brings on board summarise spending in the economy. The different levels of spending in the economy are made up of consumption, investment, political relation purchases and net exports3. The aggregate supply curve comprises of an inflationary and a non-inflationary region. This factor provides a basic article of belief for the required analysis in this paper. Different factors affect both aggregate demand and aggregate supply. withal the interaction of the two is critical to any given analysis in the economy. National output kindle be either nominal or veritable, depending on the price base used i n their computation. Where much stable prices are used to compute national output given an identified base year, real national output is computed. On the other hand, where current prices are used, nominal national output is computed. authorized GDP is obtained when the aggregate demand and aggregate supply interact. On the same point, the resultant equilibrium results in the national inflation rate4. The figure below shows an aggregate demand-aggregate supply model A number of factors affect both aggregate demand and aggregate supply. Only the factors that are important to this analysis will be highlighted. Income, wealth, credit availability, government demand, investment and future expectations on inflation, income, wealth and interest rates causes the aggregate demand curve to shift to the right upon an increase in any of them. An increase in some other factors causes the aggregate demand curve to shift leftwards. These are interest rates and taxation. On the other hand, a righ tward shift is observed on the aggregate supply when prior investment,