Australia raises interest rates

Whilst interest rates in the USA have been slashed and pressure grows for cuts in the UK, Australia has raised interest rates to an 11-year high of 7%, as part of efforts to control rising inflation. Australia's resource-rich economy has continued to expand due to a sustained rally in commodity prices. The Reserve Bank of Australia has raised the cost of borrowing 11 times since 2002. "Having both the international and domestic information available, the board concluded that a tighter monetary policy stance was needed now," said Glenn Stevens, the bank's governor. Inflation is running at an annual rate of 3.6%, above the bank's comfort zone of 2% to 3%.

http://news.bbc.co.uk/1/hi/business/7228153.stm

US recession would cause severe job losses

The Seattle Times highlights a report that suggests that 'up to 5.8 million additional workers in the United States could join the ranks of the unemployed by 2011 if the economy were to fall into a severe recession.' The report from the Center for Economic and Policy Research (CEPR) also shows the likely impact of both moderate and severe recessions, lasting two years, on the average household budget. reference is made to the psychological impact of unemployment.

http://seattletimes.nwsource.com/html/businesstechnology/2004164165_jobsoutlook05.html

Use to the article to:

1. Think about the key features of a recession and its effects.
2. Analyse the predicted situation using AD/AS analyisis.