NebbyIsBest
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- May 25, 2022
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- 2022
Hi,
I have an upcoming extended response research task related to inflation and external stability, and am currently preparing by writing practice essays. I would greatly appreciate any assistance or clarification for questions/knowledge gaps I have!
1. I'm assuming the question will be an evaluation on macro/micro policies' effectiveness in achieving inflation/external stability objectives. Reading last year's exemplar responses to the same question, the judgement was that MP, FP and micro were generally ineffective in increasing inflation to meet the objective as underlying inflation remained under 2%. However now the inflation is way above the target at 5.1%. So I'm confused as to what I should evaluate the policies to be. Are they still ineffective, as inflation would've continued to remain below 2% had external global events not occurred? Or are they ineffective for the opposite reason as they overshot inflation from below the target to above? Or are they actually effective because had external global events not occurred, then the policies would've increased inflation to a healthy rate within the 2-3% target?
2. Adding onto the previous point, I've researched that one of the primary causes for the high inflation currently stems from the record government expenditure to increase AD and thus demand-pull inflation. Meanwhile, MP's lowering of the cash rate to 0.1% was not as effective as FP as it resulted in a liquidity trap, even though MP is theoretically more effective in controlling inflation as it primarily focuses on inflation. So is this information correct, or was the low interest rates in fact a larger contributor to the rise in inflation?
3. I learned to always include limitations in assess questions like these, and have included time lag, bank cooperation and liquidity trap for MP. However aside from it not focusing on inflation, I struggle to fully understand what limits FP in this situation. What political constraints were present in the past couple federal budgets that prevented it from fully promoting what is best for the economy? What other major limitations should I note in the essay?
4. If the essay question ends up asking for both inflation and external stability, how should I structure my essay to ensure that I'm covering each syllabus point in sufficient detail? Should I focus MP on inflation, and FP on external stability, and tack on MEP at the end? Or should the structure be more evenly distributed even though it's much easier to write MP for inflation for example. Furthermore, should I talk about the development of inflation and policies since 1990, or should the essay focus more on recent events from 2015-22 as this period also covers both high and low inflation? (I understand this is dependent on my school but I would still appreciate suggestions and thoughts).
(5. Would it be cool if I add onto this thread w/ edits or replies if I have more questions? Not too sure the rules/customs of this forum since I am new, sorry!)
I apologise if this is too wordy, and I would be grateful for any answers.
Thanks!
I have an upcoming extended response research task related to inflation and external stability, and am currently preparing by writing practice essays. I would greatly appreciate any assistance or clarification for questions/knowledge gaps I have!
1. I'm assuming the question will be an evaluation on macro/micro policies' effectiveness in achieving inflation/external stability objectives. Reading last year's exemplar responses to the same question, the judgement was that MP, FP and micro were generally ineffective in increasing inflation to meet the objective as underlying inflation remained under 2%. However now the inflation is way above the target at 5.1%. So I'm confused as to what I should evaluate the policies to be. Are they still ineffective, as inflation would've continued to remain below 2% had external global events not occurred? Or are they ineffective for the opposite reason as they overshot inflation from below the target to above? Or are they actually effective because had external global events not occurred, then the policies would've increased inflation to a healthy rate within the 2-3% target?
2. Adding onto the previous point, I've researched that one of the primary causes for the high inflation currently stems from the record government expenditure to increase AD and thus demand-pull inflation. Meanwhile, MP's lowering of the cash rate to 0.1% was not as effective as FP as it resulted in a liquidity trap, even though MP is theoretically more effective in controlling inflation as it primarily focuses on inflation. So is this information correct, or was the low interest rates in fact a larger contributor to the rise in inflation?
3. I learned to always include limitations in assess questions like these, and have included time lag, bank cooperation and liquidity trap for MP. However aside from it not focusing on inflation, I struggle to fully understand what limits FP in this situation. What political constraints were present in the past couple federal budgets that prevented it from fully promoting what is best for the economy? What other major limitations should I note in the essay?
4. If the essay question ends up asking for both inflation and external stability, how should I structure my essay to ensure that I'm covering each syllabus point in sufficient detail? Should I focus MP on inflation, and FP on external stability, and tack on MEP at the end? Or should the structure be more evenly distributed even though it's much easier to write MP for inflation for example. Furthermore, should I talk about the development of inflation and policies since 1990, or should the essay focus more on recent events from 2015-22 as this period also covers both high and low inflation? (I understand this is dependent on my school but I would still appreciate suggestions and thoughts).
(5. Would it be cool if I add onto this thread w/ edits or replies if I have more questions? Not too sure the rules/customs of this forum since I am new, sorry!)
I apologise if this is too wordy, and I would be grateful for any answers.
Thanks!
