QUESTION
Since April the 6
Monetary Economics Essay/Project
is a Public Holiday and that we therefore will not be having a
lecture I have decided 3 things:
th

1. The topic for that week is inflation and this topic WILL NOT form the
basis of a question in the Test or Final Exam.

2. The topic will be done as a student reading topic i.e. I will provide you
with some lecture notes and reading and you will cover the topic yourself.

3. Inflation will form the basis of your Essay/project for the unit.

Essay project – maximum of 3000 words (excluding references).
I want you to write this essay as if you were and economist advising a political
leader on the economic situation in the country of your choice. Give him/her an
outline of the nature of the problem, what economic theory tells us about the
potential policy solutions to the problem and what the possible economic
consequences of the policy might be.
In doing this I expect you to find appropriate (real world) data and economic
examples to illustrate your brief to the minister – the brief must be well written,
well presented and clear. I do expect you to include some theory in your  brief
but I expect it to be interpreted and explained in clear lay language – no one is
going to get points for a whole load of equations and a model but they will if they
can explain what the model does, how it works and what it says.

Pick  any one of the many European countries which were suffering from high
inflation in the late 70’s early 80’s. Your project is to write a brief for the minister
explaining:

1. The nature of the current economic situation, focus on inflation but
discuss other economic data (unemployment, exchange rate etc).

2. Why inflation got to be so high and what problems such high inflation is
bringing. Use some economic theory here.

3. What policies you advise should be used – what would the government
have to do to try to reduce inflation in the next 5 years – use theory here
to explain the nature of the policies you are suggesting. What are the
likely consequences of the policies – what “side effects” might the

government expect  ‐ what institutional changes (if any) would be
required to enact the policy.
Marking Guidelines.

10% ‐ presentation, quality of exposition, use of data and diagrams. Professional
appearance of finished document (no need to bind it or put it in a glossy folder).
25% for parts 1) and 2). I expect to see good use of economic “facts and figures”
making it clear how the problem arose and what the key problems facing the
country are/were at the time.
60% for part 3). I need to see well argued, clear use of economic theory to
explain what the problem is, what the policies are and what the anticipated
effects and potential problems of your policies are.
5% correct and adequate referencing.

The essays should be submitted both in hard copy and emailed to me. The
electronic versions of the essay will be  subjected to checking for plagiarism
through the turnitin system.

You may if you wish work in groups of no more than 2 people.

SOLUTION

Introduction

The economic situation of any country is directly related to Financial planning of that nation. The term Financial Planning is defined as a process of preparing the reports related to management and creating accounts that give exact statistical and financial information that are required by the managers to make timely and short-term decisions (Majone, G. 1996).

This type of management, which shows weekly or monthly reports, particularly for the internal audience of the organization, such as department managers and the Chief Executive Officer. These reports normally reflect the amount of cash available with the company, revenue of sales generated by that firm, total amount of order in hand, and might also involve variance analysis, trend charts and other statistical results. In, Management Accounting, which is also known as Managerial Accounting, the fixed and variable costs are classified on the basis of knowledge that comprise several expectations.

Following are the processes that are available for Stay Healthy Medical Practices Pty Ltd that can be adopted by the company to make the current scenario effective:

• Complete Outsourcing: The one method that is attracting the general manger the most is to get the manufacturing outsourced. If we see the annual expenses for the container’s department, the company spends a total $424,500, which is $37,000 more than the offer made by its competitors, which also include the annual cost of repairing old containers. In this method, if the company closes the unit, it has to ask a number of workers to leave the company, which will affect the goodwill of the company and the job rate of the state.
• Partial Outsourcing: This method includes the outsourcing partial services for the container department and taking care of the remaining part itself. In this approach, the company can either outsource the manufacturing new containers or the repairing of old ones. With this the cost of the company reduced to some extent. In this approach as well, the company has to decrease the number of workers, which again will not give a good message in the market.
• No Outsourcing: This is the third option available to the general Manager of Stay Health Medial Practices. In this approach the company can keep both the jobs to itself but can reduce its cost by various ways. In this method, the decisions of the company will remain internal, not reflect the employment of the state, and will also not let the world know that how Stay Health Medial Practices is taking an action on any of its internal problem, which will not reflect its goodwill.

Involvement Of Risk

Risk perception and analysis is a wider concept and involves many notes to understand risk. Psychologists have analyzed that that people vary greatly in their perception of risk. Social scientists study the perceptions and behaviors of risk of the groups in society and uncover unusual difficulties. The need of rational and objective concepts and tools have been recognized by Engineers, medical researchers and many others to support with understanding the form of risk, assuming its extent and measuring the sufficiency of designs and operational practices. Formal academic and realistic work in the fields of risk and perception has taken place since shortly after the Second World War.

From the times, ‘risk assessment’ has been seen as a critical activity by the safety and health practitioners in industry and to get the proper knowledge of the concept of ‘risk’ that underlies ‘safety’. Few years earlier, these expansions in ‘safety’ thinking, industrial insurance started to be seen as just one part of a more complete form of the concepts of risk management. In the present times, ‘risk’ and its management is the base for the advisers and consultants of the industry, practicing in nearly every division of industry (Dorfman, S. Mark 2007). However, specifically those including high capital value, high political sensitivity and high liability or responsibility. The risk management standards are published by the specific bodies around the world that are used by the practitioners of risk management to support their practices and services.

In risk industry person, who is managing the responsibilities, will make risk-related decisions regularly. Therefore, to formalize the method to risk management that is not formulating something new. Any decisions related to risk can be made with the expectations and experience, which is a quick weighing of the advantages and disadvantages.  This can also be made after an effortful activity by a consortium of people. Moreover, it can also be created after using the analysis tools that are constructed specifically for this. Possibly whatever the level of seriousness of the risk is, the requirement of the usage of formal methods is generated. Though, there are situations when no-one understands the presence of a risk, mainly due to previous experience that has not made it obvious, either because there is no past experience or because it was not seen as such. In these cases, there are tools that are required to help to help the analysts to recognize the possibility (Peltzman, S. 1979).

The main aim the risk assessment and anticipation, is to bring the main foundation an understanding of risk in to existence. This understanding is presented by the ‘models’ that represent the statements of plans that experience has expressed to be rational and useful. Alongside other attributes, these models also let the analysts to define terms in a formal manner. Generally these definitions go different from the informal meaning of the terms. The method to communicate about risk is to clearly define terms to the person, who is approaching the subject from an exact standpoint.

Regulations

The regulation theory in Australia is a point of discussion and comparison. Over so many years there have been several points or debate, discussion and arguments on the requirement of for regulation. There are many points included in this regulation that are markets do not function every time in the greatest interest of the societies and to optimize the allocation of resources. Although, these interests form some sort of intervention according to the requirement of the regulation.

The issues of regulation of accounting became an issue of concern and discussion, specifically following the economic crisis and crash of the year 1920-30s that headed to for the accounting theory and principles defined. The main aim of accounting is to offer details and detail to the involved parties, who might not have contact to full or partial, but required economic decision. Due to their information disadvantage, they are irregularity in the working and use of information.  However, the regulation of accounting is seen as relating to “sustained and focused control exercised by a public agency over activities valued by a community”, there are other outlooks.

Models & Theories A Country Follows

Macroeconomics comprise national, global and area-wise economy. Equilibrium is one of the most general field in economics. This set of equilibrium is the type of economics has indicated methods, including GDP, unemployment rates, and price indexes to get the knowledge about the functioning of the economy as an individual.

This is responsible for developing basics that explains the connection amongst measures like national income, output, unemployment, consumption, inflation, savings, international trade and finance. Therefore we can clearly say that when there is a set of equilibrium is symmetric and perfect, then the equilibrium appears to be not equal.

This segment is secondary and not important as one-period section. It is not compulsory to first compute the one-period mean-variance analysis to calculate multi-period analysis. One can directly switch to this segment. But, if the requirement is to extend the one-period mean-variance analysis result, both the sections are needed to be related. This is the basic section of mean-variance analysis. In this segment, the standard mean-variance is developed for log returns for single period log. In this section, the result cannot be extended to a multi-period environment, even if it is required. To do this, one has to switch over to the next segments of mean-variance analysis. In this section, an important approximation is added by Campbell and Viceira.

This theory provides a lot of option to investors and gives a better of understanding of risk and expected return, before he or she puts the money in the market. It is considered to be an alternative method to unite unrestricted mean with limited second market to find out the portfolios that are ideal in a sense of mean-variance for average and common conditions of the market. Therefore, this is approach mostly comes out as one of the sensible choices for policy portfolios of institutional investors of long-term.

This is responsible for developing models that elaborates the relationship amongst factors such national income, output, unemployment, consumption, inflation, savings, international trade and finance. Therefore we can clearly say that when there is a set of equilibrium is symmetric and perfect, then the equilibrium appears to be not equal.

This segment is secondary and not important as one-period section. It is not compulsory to first compute the one-period mean-variance analysis to calculate multi-period analysis. One can directly switch to this segment. But, if the requirement is to extend the one-period mean-variance analysis result, both the sections are needed to be related. This is the basic section of mean-variance analysis. In this segment, the standard mean-variance is developed for log returns for single period log. In this section, the result cannot be extended to a multi-period environment, even if it is required. To do this, one has to switch over to the next segments of mean-variance analysis.

Equilibrium also includes Keynesian model. This is the standard model of the economy in the short-run. This model is still existed in the textbooks of undergraduate macroeconomics. This is the other name of Aggregate Demand/Aggregate Supply model. This type of equilibrium is a segment of costs and an allotment that with the prices, several traders raise their goal function to the maximum, pending for the technical prospects and resource limitations schemes to the business into into the part of the planned allotment, and such that the money creates all net businesses companionable with one or the other by comparing average demand and supply of the commodity that are traded.

This model was established by John Maynard Keynes and John Hicks in the years of 30s and 40s. The model, however referred to by Keynes, did not get its full expansion till the late 1950s and early 1960s. The outcome model is also called as the “neoclassical synthesis.” Generally, the model expects that there are two relationships amid result and the cost level. Collective demand is basically related to the combined demand for goods and services of customers, companies and the government , however collective supply raises from the costing and the decision of production of the companies (Stein, L. Jerome 1982).

This theory provides a lot of option to investors and gives a better of understanding of risk and expected return, before he or she puts the money in the market. It is considered to be an alternative method to unite unrestricted mean with limited second market to find out the portfolios that are ideal in a sense of mean-variance for average and common conditions of the market. Therefore, this is approach mostly comes out as one of the sensible choices for policy portfolios of institutional investors of long-term. An when it comes to risk, it is the possible form of the pressure that comes in between, when an activity or action. It leads to the loss or an undesirable result for the company. There are many types of risk in the market now a day, such as economic risk, health risk, environment risk, financial risk, information risk, technology risk, information security risk, insurance risk, business risk, management risk societal risk, human risk, factor risk, and many more. These risks normally exist in the market with all the pressures, and the individuals have to face one or the other risk while either investing in the market, the purpose of this topic is to introduce the formal foundation of an understanding of risk. This understanding is conveyed by ‘models’ that are statements of ideas that experience has shown to be logical and useful. Amongst other attributes, these models enable us to define terms formally. These definitions may be different from the colloquial meaning of the terms. The ability to converse about risk using clearly defined terms is one mark of the person who is approaching the subject from a rigorous standpoint.

As mentioned in the introduction to the subject, everyone is to some degree a manager of risk and most of the terms we use have a meaning that is generally understood. By the end of this study, you should be able to distinguish yourself from others by the ability to think more clearly and meaningfully about risk, using these formal meanings. However, in the end you will still need to be able to convey this understanding to the non risk-literate person.

Ways Of making Decision

Accounting policy in Australia a requirement, but it is over-rated and the main reason of this over-rate is that government is the ultimate monopoly. The impact of this governmental monopoly on the law-making procedure is to manage that what is produced and the ways of distribution of consequential production within the societies. The governments driven environments that are not checked properly are ever an expanding perpetual-motion machine. Any administration is rapidly confined by special-interest units such as the receivers of the regulation, the minister and their staff who are keen to keep that portfolio and make it influential; the departmental employees, who run the regulation and wish to make it “better” and non beneficiaries who do not want to be excluded.

All the departments of the government must have a rigid, declining, regulatory budget – measured both by quantum and pressure of regulation. Any organization, which goes over the budget of the government, is likely to be banned from launching new regulations until they find old regulations to remove. The yearly budget for each section would lead to a decline in the overall regulatory burden each year (R v London County Council).

This policy is not normally understood to be a part of the common law, and so a law continues in force, until canceled by parliament, although long the time may have been since it was known to have been actually imposed.  There is though some model for the principle, and at times the Latin maxim “jus incognitum” or “unknown rule” has been used to change down unclear and outdated rules by the courts. Developing the principle of desuetude would give the prosecutors the methods to strike down old, the legislation that is not used as no longer law – of course, the regulations for this must be a bit restricted, so that objector moderators cannot use the approaches to hit down legislation only as they do not like it (Campbell 2009; Chan 2009; Viceira 2003). There is complete awareness of the irony that with a motive of enabling this policy to be launched, a new rule of Parliament would have to be issued.  Regulation Impact Statements must be a necessary procedure, which allows a real method of the expenses and advantages of regulation. Regulations that do not able to clear the test must be submitted back to Parliament or the related Minister.

Conclusion

This is responsible for developing models that elaborates the relationship amongst factors such national income, output, unemployment, consumption, inflation, savings, international trade and finance. Therefore we can clearly say that when there is a set of equilibrium is symmetric and perfect, then the equilibrium appears to be not equal.

This segment is secondary and not important as one-period section. It is not compulsory to first compute the one-period mean-variance analysis to calculate multi-period analysis. One can directly switch to this segment. But, if the requirement is to extend the one-period mean-variance analysis result, both the sections are needed to be related. This is the basic section of mean-variance analysis. In this segment, the standard mean-variance is developed for log returns for single period log. In this section, the result cannot be extended to a multi-period environment, even if it is required. To do this, one has to switch over to the next segments of mean-variance analysis.

Equilibrium also includes Keynesian model. This is the standard model of the economy in the short-run. This model is still existed in the textbooks of undergraduate macroeconomics (Blanchard, Olivier 2000). This is the other name of Aggregate Demand/Aggregate Supply model. This type of equilibrium is a segment of costs and an allotment that with the prices, several traders raise their goal function to the maximum, pending for the technical prospects and resource limitations schemes to the business into into the part of the planned allotment, and such that the money creates all net businesses companionable with one or the other by comparing average demand and supply of the commodity that are traded.

This model was established by John Maynard Keynes and John Hicks in the years of 30s and 40s. The model, however referred to by Keynes, did not get its full expansion till the late 1950s and early 1960s. The outcome model is also called as the “neoclassical synthesis”, (Keynes, John Maynard 1919). Generally, the model expects that there are two relationships amid result and the cost level. Collective demand is basically related to the combined demand for goods and services of customers, companies and the government , however collective supply raises from the costing and the decision of production of the companies. This policy is not normally understood to be a part of the common law, and so a law continues in force, until canceled by parliament, although long the time may have been since it was known to have been actually imposed.  It can be seen with less amount of principal (Callan 2007; Thomas, 2007) and higher rate of interest, the company can make more money as interest at the end of the given years. The amount is calculated with the help of the formula of compound interest. Therefore, the outcome model is also called as the “neoclassical synthesis.” Generally, the model expects that there are two relationships amid result and the cost level.

REFERENCES

Majone, G. 1996. Regulating Europe, London, Routledge.

Dorfman, S. Mark. 2007. Introduction to Risk Management and Insurance. Englewood Cliffs. N.J: Prentice Hall. ISBN 0-13-224227-3.

Peltzman, S. 1979. Toward a More General Theory of Regulation. Journal of Law and Economics. V 19. pp 211-240.

Blanchard, Olivier. 2000. Macroeconomics. Prentice Hall. ISBN 013013306X.

Keynes, John Maynard. 1919. The Economic Consequences of the Peace. New Brunswick: Transaction Publishers. ISBN0765805294.

Stein, L. Jerome. 1982. Monetarist, Keynesian & New classical economics. Oxford: Blackwell. ISBN0631129081.

Callan, S.J. And J.M. Thomas. 2007. Modelling the Market Process: A Review of the Basics. Thompson Southwestern, Mason, OH, USA.

Campbell, J.Y.; Y.L. Chan and L.M. Viceira. 2003. A multivariate model of strategic asset allocation. Journal of Financial Economics.

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