TECO401 The Principle Of Economics

Assignment 2 for TECO401 the Principle of Economics

With the development of economic globalization and technology innovations, the global economic is affected by different aspects. Specially on the currency market and international exchange rate, which is depends on gross domestic product(GDP) as well as the inflation rate, interest rate, bond market, labor market, etc. Even the unemployment rate can be results on the changes of the currency market. Based on the article: US jobs data pressure Aussie dollar, it is argued that, the macroeconomics theory will analyze and explain the exchange rate between US and Australia. Three major parts used from macroeconomics theory will be discussed which are: gross domestic product(GDP) structure, unemployment
In other words, it is the total value which a country produced in a year. So GDP is a scale to compare different countries ' activities in the one year period. In the article "US jobs data pressure Aussie dollar", it indicated that good economic data in US showing improvement in employment conditions and consumer and business confidence. On the other side, Australian dollar has slipped against US dollar amid a better outlook for US economy. In results, US dollar has stronger buying power in the world market, so it is a good sign for US to gain further advantages in export and import. In the structure GDP, production is equals to expenditure and equals to income. The more a country produced equal to the more it spend and gained on income. During the financial crisis begins in USA since last year, US government pushes a lot on the international business and trading, create lots of job opportunities for the local people which results the increase on domestics productions and labor incomes. So the total GDP of US is going up after meeting a hard time in financial crisis. As established by international trade theory, an improvement in the terms of trade, other things equal, is income and welfare enhancing
In recent decades, Australia used to exporting mines, irons, basic production material, etc to gain a increasing on GDP. But now, the expenditure is much more than before especially on the labor cost. So Australia decided to import or outsourcing to replace the high expenditure on the labor. For example, domestic vehicle company Holden decides not to make any cars inside Australia because the highly demand on the labor cost increasing every year, but this demand is not connected with the sales on the cars, so the company has to make a decision that move the factory to other country, in other words, it is outsourcing the international labor because this way is much more cheaper than hiring a local people. In this situation, the importing is increasing, unemployment is increasing but the GDP is decreasing. In addition, Fisher also stated that growth on the GDP or decrease on GDP has a strongly effect on the foreign exchange rate . So when the American dollar getting stronger in the exchange market, at the meantime, Australian dollar keep steady or going down, will result on the differences on the currency. In conclusion, GDP structure will affect on the foreign exchange rate of a