Your essay should address the following four aspects/questions:
1) What role does RBA play in Australia? Discuss the tools available at the disposal of RBA to carry out its functions.
2) Discuss the current economic environment (inflation and interest rates) in Australia, monetary policy employed by the central bank, and effects of those policies on financial markets including asset values and yields.
3) In the article, “Is the deflation bugbear heading down under?” (Fensom 2017), economist Paul Dales is quoted as saying, “an average inflation rate of around 2 per
cent or below could mean that many economies, including Australia, are just one recession away from deflation. In other words, the next economic shock might not need to be very large to push inflation below zero”.
Explain the connection between recession and inflation. Why is deflation so dreaded? Comment by drawing on the experiences of other countries that have experienced deflation.
4) In the article, “Is the deflation bugbear heading down under?” (Fensom 2017) leverage dynamics are discussed. Use this as a starting point to explain how leverage matters for the economy.
Please organize your essay as follows:
Executive Summary (not counted towards the word limit)
Table of Contents (not counted towards the word limit)
Main Body (address the four questions explained above)
References (not counted towards the word limit). Please use Harvard style,