Australian monetary policy and fiscal policy.
The reasons presented by RBA are consistent to the main monetary policy objective but not completely . RBA 's insistence is much on controlling inflation , which is of course in accordance with the main objectives but the other objectives have not been given the attention they ought to have . For instance , unemployment has not been given preference in the monetary measures , holding that wages rates have been moderate during the year . Though moderate wages are good sign , but the increasing population and the prices of commodities do require revising the wages accordingly p
In a nutshell RBAs measures and strategies for monetary policy are effective with the insistence on short and medium term planning but there must be some long-term measures that can bring a sustainable growth . The economic indicators affecting the monetary policy also include GDP along with cash rate and inflation , so keeping connections with the fiscal policy can be a better option to have more realistic analysis and forecasting financial position of the economy , instead of just relying on the single variable , i .e . cash rate
Mundell Fleming Model as it 's an extension of IS-LM model with the only variation of discussing a small open economy . It is , however , to be noticed that the model is based on an important assumption , i .e . the equalization of the local interest rate to the global interest rate . In to have an analysis of the economy using this model let 's have an overview of what should be the points to discuss . These points can separately be classified under flexible exchange rate and under fixed exchange rate
Under the former head , the increase in money supply followed by decrease in exchange rates makes local goods cheaper compared to foreign goods and increases export and decreases import , increase in government expenditure bringing...
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