Question

What are the determinants of long rung economic growth? Is the expansionary monetary policy response package by RBA, during COVID-19 pandemic sustainable to meet monetary policy goals, macroeconomic objectives and long run economic growth? Or complementary fiscal policy is also required fro economic recovery YES/NO, justify your answer with reasons use SEVERAL REFERENCES. NOTE: Use GDP, inflation, unemployment, fiscal deficit, and housing market data, which can be obtained from the Australian Bureau of Statistic and RBA websites for the last 2 years trends, when answering the question.

Answer 1

Ans

determinants of long rung economic growth

It defined as the sustained rise in the quantity of goods and services that an economy produces. The GDP of a country is closely tied to the growth of the population in addition to prices and supply and demand.

There are four major determinants of economic growth: human resources, natural resources, capital formation and technology, but the importance that researchers had given each determinant was always different.

1Growth of productivity

in long an there must be increase in GDP and the productivity of economy and the use of resources must be best and full utilisation it will ultimately increase the rate of growth the country

2Demographic changes

demographicfactors influence economic growth by changing the employment to population ratio. Factors include the quantity and quality of available natural resources.

Labor force participation

amount of labor force participation and the size of economic sectors influence economic growth. The labor force participation is the amount of workers available. In countries with high development and industrialization, labor force participation is high because of low birth and death rates.

In the time of covid-19 period there is large loss of economic and country so the monetary policies are taken tu to recover that in the large-scale the monetary policies had adopted by the government such as

1Lower the Cash Rate

the rate which is charged by the central bank is lowered at that period because the availability of loan and the money is required by the commercial bank to provide it at the form of loan to the general public to increase the flow of money in the market and to regulate the money for development purposes

2Provide a Term Funding Facility for the Banking System, to Support Lending to Businesses

the government provide the private banks to provide the loan on interest rate sort of which is useful for funding facilities or provide financialstability through startup new programs for the businessman and landing support to them.

3 Provide Liquidity to the Financial System

The central bank provide extra liquidity e to the financial system to provide money to the general public at simple interest ratesubstantial extra liquidity into the financial system through its daily market operations

Provide Liquidity to the Government Bond Market

The central bank stands ready to purchase the bonds and semi-government securities in the secondary market to support its smooth functioning. The government bond market is a key market .because government bonds provide the pricing benchmark for many financial assets. The Bank is working in close cooperation with them.

Fiscal policy

the government take fiscal policies to recover the losses in the covid-19 time the fiscal policies are determined that the policies which measures taken by the government to regulate the money function in the actual way which fulfill the actual demand of money in the market.

Sources secondary source and the some of websites