Hrm502 Human Resource Management - Assessment Answers

Assessment Range and Conditions: This task should be completed in Microsoft Word and uploaded to eLearn. All information should be in text either Harvard Style or APA for each question and in a correctly formatted reference list at the end.

 

Assessment Criteria: To achieve a Satisfactory result, your assessor will be looking for your ability to demonstrate the key skills/tasks/knowledge detailed in the Assessment Task to industry standard.

 

• Apply Economic Principles and Theories
• Evaluate Economic Aspects that apply to decision making
• Maintain personal understanding of economic principles 

Farming; this is because close to 12% of the value of the AUD comes from farming activities and the related agricultural processes. If any unfortunate events such as drought or restriction that prevents the export of these agricultural products occur, then the AUD will be affected.

Reserve bank policies; the AUD is quite popular for the bilateral trade between Australia and Japanese Yen, for which an interest rate of close to 4% spreads between these two countries. The Australian bank reserve policies will determine the direction of the interest rate and the profitability of the AUD as far as investment is concerned. (Blundell-Wignall, 2015)

Mining; the price of the Australian dollar is largely impacted by resources such as oil, gold and coal. This means that depletion of such resources or putting a restriction to their exploitation and also a fall in demand of these resources in the export markets will have an impact on the performance of the AUD.

This movement affects the profitability of Australian businesses in several ways depending on whether it is a depreciation or appreciation;

When AUD appreciates, the profits from imports would increase because it makes the imports cheap and hence their demands increases. On the other hand, appreciation decreases the profits from exports because it makes the exports to be expensive and hence reduces their demands abroad

When the AUD depreciates, profitability from the imports decreases because it makes the imports to be expensive thus a reduction in demand. Consequently, it increases profitability from the exports because it makes the exports cheap and thus increases their demand.

Foreign exchange hedging is a type of a transaction that is carried out by a forex business people or investors to protect their businesses from foreign exchange risks that arises from transactions in foreign currencies. Hedging would assist Australian businesses to diversify globally and take advantage of these global markets without having to incur the risks of currency losses. (Dash, 2013). https://www.rba.gov.au/publications/bulletin/2017/dec/8.html.

Roles of Interest Rates in the Economy

An increase in the interest rates encourages saving and this leaves them with less disposable income, thereby decreasing the price levels. In contrast, a decrease in the interest rates encourages borrowing and this leaves consumers with more disposable incomes which increases the price levels.

Price levels are measured using the consumer price index(CPI). It measures the percentage change in the price of basket of goods and services purchased by households.

Interest rates plays a role in the economic growth in that raising it increases the cost of borrowing, which in turns reduces the disposable income and hence limiting consumer expenditures which in turn thwarts economic growth (John, 2014).

The GDP is the measure of economic growth. It is arrived at by summing the total value of goods and services produced within the country.

Interest rates can also control unemployment in that lower interest rates would encourage borrowing which would leave the consumers with higher disposable incomes, this increases their expenditure on goods and services and increases demand. It also enables them invest in the economy thereby creation of jobs through these investments and high demands.

Unemployment rate is the proportion of the labor force that is unemployed. To get to this statistic we need to calculate the total number of people who are unemployed, we then take this total as a percentage of the total labor force. Labor force is the total individuals over the age of 15 who are eligible to work, and it includes those in employment and those unemployed.. (John, 2014).

Expansionary and Contractionary Monetary Policies

Expansionary monetary policies lead to a decrease in the interest rates. to increase money supply in the economy, the interest rates are lowered so as to encourage borrowing and stimulate economic growth through high expenditures in the economy.

Contractionary monetary policies decrease the interest rates. This is because it is aimed at slowing down inflation rates and therefore there is a need to discourage borrowing. (Blanchard, 2017) .

Expansionary policy	price level	unemployment	Aggregate demand	Economic growth	Consumer spending	Business profitability
	increases	Decreases	Increases	Increases	increases	Increases
Reason	Increase in demand over supply	High demand leads to investment and creation of employment	Due to increase in disposable income	Due to increased expenditure in the economy	Due to increase in disposable income	Stimulated demand leads to high sales
Contractionary policy	decreases	increases	decreases	decreases	decreases	Decreases
Reason	Due to decrease in money supply and hence low demand	Due to low demand and low investment activities	Due to a decrease in disposable income	Due to a decrease in public expenditure in the economy	Due to the reduction in disposable income	Due to low demand thus low volume of sales

(Blinder, 2015).

The purpose of the stimulus package was to increase spending in the economy so as to pull the country out of the recession and prevent economic slowdown. It is intended to keep the economy afloat by creating jobs and increasing aggregate demand in the economy. This expenditure by the government has a multiplier effect in the economy in that for every dollar spent, bigger percentage of it is expected to be generated out of the activities on which it was spent. The fiscal policy is based on the Keynesian theory of expansionary and contractionary fiscal policies. (Blinder, 2015).

Reliability of Unemployment Measures

The unemployment rate measures are not reliable because its sole focus is on the unemployed only. It doesn’t take into account those who are marginally attached to the work force and also the discouraged workers (those who are not actively seeking for employment in the period the survey was conducted). It also doesn’t differentiate between part time workers and full time workers. As we know, the part time workers falls under the underemployed and not fully employed . (Fleisher, 2014).

Goods and Services Tax

Some of the impacts of 5% increase in the GST on consumers and businesses

The Australian government has proposed an increase of goods and services tax from 10% to 15%. overall, this would negatively impact the economy in the following ways

There would be a reduction in the consumers spending ability as the increase in prices of these commodities would discourage spending. Non-essential goods and luxuries would suffer most as consumers will greatly check their expenditures on these goods.

The costs of production would increase and this would prompt necessary measures by businesses to counter this. Most likely, they would do this by laying off workers and this would lead to an increase in the number of those unemployed.

Economic growth would be affected because of the decline in demand of goods and services. Investments would also decline because the lack of demand. This might force businesses to close down because it is very unprofitable to do transact in an economy that is doing badly. (Nayak, 2016).

Metric	Its meaning	What it shows	What it doesn’t show
Interest rates	It is the rate charged by banks on money borrowed	Low rates shows increased expenditures while high rates shows reduced expenditures	Flow of money in the economy
Inflation rate	It is the percentage change of a price index over time	Rates of increase in prices of commodities	Price increase in specific commodities
GDP	Monetary measure of all goods and services produced in a period of time	Rate of economic growth	The national debt
GDP per capita	It is a measure of the total output of a country which is computed by dividing the GDP by the country’s population	Relative performance of countries	It doesn’t show the spending power
Exchange rate	Rate at which one currency changes for another	Performance of a country’s currency compared to others. Most common being the AUD/US exchange rates in Australia	It doesn’t show to what extent the various factors causing this movement impact on the overall rate.
Unemployment rate	It is a measure of the prevalence of unemployment	Number of the idle workforce	Underemployment

As was expected, the Bank of England voted in favor of interest rate increase from 0.25% in 2017 to a record high of 0.5% in the last quarter of 2017. The rate has been maintained to keep tabs on the inflation rate that is expected to go higher than the expected rate of 2% (Source; Bank of England)

UK recorded the lowest economic growth of 0.1% in the first quarter of 2018, compared to 0.4% growth rate that had been recorded in the last quarter of 2017. It recorded the highest rate in the first quarter of 2017, a rate of 0.7%. (Source; Bank of England).

The UK’s inflation rate had been rising steadily from July 2017 when an inflation rate of 2.6% was recorded, to November 2017 where an inflation rate of 3.1 was recorded. From there, there has been a steady decline to 2.5% in March. (Source; Office for national statistics).

The use of graphs makes it possible to explain the relationships between the variables under study. It enables us to study the trends in the movements of the variable overtime and gives visual illustrations of the relationships of variables under study. Graphs are also easy to read and interpret.

Inflation rate- this is important because the inflation rate determines the aggregate demand in the economy.  Inflation rate in the UK has been falling steadily and as at April 2017, it stood at 2.5%. this means that the economy is doing well and that the prices of goods are stable. For Australian businesses, this means that exportation will yield high profits because the sterling pound is higher than the AUD.

Exchange rate-this is important because it will determine the profitability of the exported goods. If the AUD is weaker than the sterling pound, it is the best time to export goods to the UK because it will yield more profit when the currency is exchanged back in Australia. On the other hand, when AUD becomes stronger than the sterling pound, it will not be profitable to do business in the UK because it will lower profitability of the exports. (Kedia, 2016).

References

Blanchard, O. O. (2017). Policy implications. IMF economic review, 2(22), 563-586.

Blinder, A. S. (2015). Does fiscal policy matter? New York: Macmillan.

Blundell-Wignall, A. (2015). Major influences on the Australian dollar exchange rate. The exchange rates,international trade, balance of payments and the reserve bank of Australia, 2(7), 30-79.

Dash, M. (2013). Exchange rate dynamics and forex hedging strategies.

Fleisher, B. M. (2014). Effects of unemployment. New York: Mc Graw Hill.

John, S. R. (2014). The measurement of unemployment. Econometrica, 4(15), 140-180.

Kedia, B. L. (2016). Factors inhibiting export perfomance of firms. Management international review, 7(34), 30-56.

Nayak, C. R. (2016). Goods and services tax. Boston.