Financial Cycle and Macroeconomics Cengage

Question: Discuss about the Financial Cycle and Macroeconomics Cengage. Answer: Introduction: In the words of Borio (2014), due to the diminishing returns of the input, the output rises. With the rise in the output, it can be observed that the marginal product for the variable input would be decreased. Therefore, it can be stated that the marginal cost curve is upward sloping. In addition, law of diminishing of marginal return refers that higher labours are able to produce extra units of output. As a result, it can be seen that marginal product for labour is less as well as the marginal cost is increasing. Therefore, it can be concluded that marginal cost curve is upward sloping. In most of the production procedure, it can be observed that the marginal product of labour has been increasing primarily and reach to the highest position. Figure 1: Upward sloping marginal cost curve (Source: Brunnermeier, Eisenbach and Sannikov 2012) The major determinants of the economic growth such as rise in the real GDP depend upon some specific factors. The factors are such as factors, which affect both the consumer spending and the productive capacity. More specifically, it can be stated that the supply factors are such as the natural resources, capital goods, human resources, technology etc. On the other hand, it can be stated that with the rise in the demand of goods as well as services, the supply side will also increase. In this context, it can be stated that the efficiency factors also reflect the economic growth. In the words of Evans and Honkapohja (2012), production possibility frontier develop the opportunity costs and the trade offs. This reflects the consequences of growth of the economy. Therefore, in this respect, it can be stated that there is a positive relationship between PPF and economic growth. Therefore, if Production Possibility Frontier curve shift to the outward, there will be growth in the economy. On the other hand, it can be also stated that with the shifting of production possibility frontier to the inner wards, the economic growth will be decreased. Therefore, Mankiw (2014) mentioned that the allocation of resources along with the production capacity will be effectively decreased. The market of Australian Post is similar to the perfectly competitive market. All of the citizens have enough knowledge regarding the postal service of the country. As per the statement of Borio (2014), Australian post is the largest governmental section, which earned AS$ 6.3 billion revenues and earned profitability from this sector AS$ 103m before the imposition of tax in the year of 2014. This amount of revenue earning and the profitability would reflect to identify and understand the market structure of the Australian post. Nonetheless, Borio (2014) argued that the rate of profitability has been decreased from the previous year as the profitability statement in the previous year before the imposition of tax was AS$ 210m. In order to discuss the alternative or the substitute services over the Australian post, Brunnermeier, Eisenbach and Sannikov (2012) opined that in the year of 2014, the volume of Australian post was increasing by approximately 12.8%, whereas the market for the retailing or the total sales of e-commerce was increased by 17.3%. This was comparatively higher from the growth of Australian post. Therefore, in this context, it can be stated that instead of Australia post service, the citizens of Australia are willing to take the service of smart send courier, E-go courier, Auspost and Sendle services etc. This study also tried to highlight the profitability statement of Australian postal service in the year of 2015. In this case, the following figure is helpful to understand the profitability statement of the mentioned year. Figure 2: Profitability statement of Australian postal service (Source: Anon 2016) The above figure depicted that the profitability statement of Australian postal services has been decreased in 2015. More specifically, Mankiw (2014) mentioned that in the year of 2015, Australian postal services has been incurring loss by the amount of AS$ 352.1m. In this section, this study has tried to identify and understand the market overview of gym organisation in Sydney. After the market research, it can be observed that the revenue is AS$ 2bn and the annual growth rate was 9.5% in the year of 2015. In this connection, it can be concluded that the market for the 24 hours gyms and the fitness organisations has been changed since last five years. It has been increasing with the rise in time. In this connection, Evans and Honkapohja (2012) mentioned that due to the rise in the awareness regarding the health, people are willing to go to the gyms. As a result, it can be assumed that the profitability from the gym business has also been increasing over time. Therefore, it can be concluded that it would be profitable with the opening of gym centre in Sydney, Australia. As a result, Borio (2014) cited that the competition within the business of gym industry would be increased during the past five years in Sydney. In order to discuss the market structure in the short run and the long run, it can be assumed that the market for the gym business in Sydney is like monopolistic competitive. Therefore, the service and the products of one organisation are differentiated from other. Therefore, in the short run, the profitability statement of the newly opened business would be lower in terms of concentration ratio. The reason can be discussed as higher competition. Figure 3: Short run market structure for gym organisation (Source: Borio 2014) On the other hand, by maintaining of the quality of the service, the newly open gym organisation would earn normal profits in the long run. As per the question, it can be stated that there is a negative relationship between the increase in the ageing population and the impact of GDP in Australia. In this connection, Mankiw (2014) stated that with the rise in the ageing population in Australia, the productivity as well as the growth of the economy of Australia has been would be decreased. In addition, the labour supply would be reduced and the effect of the unpaid work would be increased. References Anon, (2016). Available at: https://auspost.com.au/annualreport2015/docs/australia-post-annual-report-2015.pdf [Accessed on 15 Sep. 2016]. Borio, C., 2014. The financial cycle and macroeconomics: What have we learnt?.Journal of Banking Finance,45, pp.182-198. Brunnermeier, M.K., Eisenbach, T.M. and Sannikov, Y., 2012.Macroeconomics with financial frictions: A survey(No. w18102). National Bureau of Economic Research. Evans, G.W. and Honkapohja, S., 2012.Learning and expectations in macroeconomics. Princeton University Press. Mankiw, N.G., 2014.Principles of macroeconomics. Cengage Learning. Scarth, W., 2014. Macroeconomics.Books.