Macroeconomic Policy

Introduction

It is the study of the economics of a country, it is the theory which determines the behavior of a countries national economy. Its amin aim is to predict along with forcasting the economical indicators which includes the rate of un employment in a country, the rate of inflation along with the gross national product. A set of complex models of mathematics along with computerized simualtional techniques for the prediction and the forecasting of the indicators. The model is formally known as the econometrics. Once, these forecasts are done the data is then supplied to the government officials responsibe for the development of a countries economical policy. In order to help them in the development of a sound economical policy (Arnold, R. A., 2010).

The performance of Australian economy actualizes as both cause and effect. The phase of the economic cycle serves as a catalyst that permeates the decisions of individuals, business firms, and government policy makers on a continuous basis in Australia. It affects the prices and yields of financial assets, the spending decisions of consumers, corporate borrowing and investment, and choices available to general public. Yet the course of economic activity in Australia is also the result of the expectations and actions of its participants. Their collective behavior works in conjunction with the state of nature, which may include favorable conditions or unfavorable conditions, such as excessive droughts, flooding, or other disasters, to guide the economy along its trajectory.

Despite the importance of assessing economic performance in Australia, its measurement and evaluation are elusive. This is true for three main reasons. First, just as beauty is in the eye of the beholder, the state of the economy depends on the evaluator. There is no one universal criterion or natural law that determines the standard by which performance is judged.

Australian Economic Analysis

Australian Macroeconomic performance refers to the behavior of the entire economy. Economies follow a cyclical pattern, which is referred to as the economic cycle, or business cycle. The measurement over this cycle by macroeconomic data is the result of aggregation, which means combining many individual units into one overall economic unit. Although this has the downside of hiding the measurements of the individual components, it is necessary because the data must be combined to be useful. Because most markets tend to move in unison across the business cycle, much of the data on individual markets can be relegated to the examination of economy-wide variables, which generally reflect an adequate signal of the phenomena whose measures are desired. The primary variables for measuring economic performance are the level and growth rate of national output (both overall and per capita), the inflation rate, and the unemployment rate (Plosser, 51-77).

The Business Cycle

The first panel shows the phases of the business cycle along with Y* = potential GDP. The second panel shows the phases of the stock market cycle as a leading indicator of economic performance.

The business cycle represents the tendency of economic activity to rise and fall over time in a cyclical ...