While the Budget factored in a decline in Australia’s terms of trade, the fall in global commodity prices over recent months has been larger than anticipated.
“While the Budget factored in a decline in Australia’s terms of trade, the fall in global
commodity prices over recent months has been larger than anticipated.” (Australian Treasury, Mid-year Economic and Fiscal Outlook 2012-2013, 22 October 2012, p16)
a) Discuss the reasons for the main movements in Australia’s terms of trade over the last decade. (6 marks)
b) What could be the likely impact of a decline in the terms of trade on the Australian Economy? Analyse the impact on the macroeconomic variables in Australia, making use of the Mundell-Fleming model, assisted by diagrams. (8 marks)
c) Discuss the implications for monetary and fiscal policy of the decline in the terms of trade. Make use of diagrams in your answer. (6 marks)
This assignment is in essay format and should conform to standard referencing procedures. That is, footnotes should be used to support the text and all reference listed alphabetically in a bibliography. At least five references should be included as evidence of the extent of research undertaken.
Presentation: deduction of up to 4 marks
a. All assignments are to be submitted online in the area provided in DSO. They are counted as ‘on time’ if submitted by 11:59pm AEST or AEDST on the due date. When submitting online, you must check that you have submitted work correctly by following the instructions provided in DSO.
b. A printed copy must also be submitted. On-campus students should submit this at the Faculty Office by the due date. Off-campus students must mail a printed version with the envelope date stamped on or before the due date. The mailing address is:
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Deakin University
Waurn Ponds VIC 3217
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A Faculty Assignment Attachment Sheet containing this declaration is available online in DSO. A copy of this sheet must be completed and attached with the online submission. On-campus students must attach a signed copy to the printed version of the assignment. Off-campus students submitting a printed assignment should attach the form provided with your unit materials.
d. No extensions will be considered for the assignment submission due date unless a written request is submitted and negotiated with the designated Unit Chair/Coordinator.

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