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Answer the following question ensuring that you apply economic principles or theory related to understanding the health of the economy and the need for government intervention to inform your analysis and support your decisions. Communicate your ideas with correct grammar, spelling and writing style and support your answer with diagrams and examples as necessary.Question (10 marks)Using appropriate diagrams, explain the likely impact of drought on macroeconomic equilibrium in Australia. Use evidence drawn from media reports to illustrate you answer. How might government policy response to the drought modify the macroeconomic impact of the drought? Online submission via Turnitin is required for this assignment. Details will be provided by your subject lecturer.Rationaleback to topThis asses

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Part 1: Introduction

The effects of drought on the Australian economy bring up a lot of issues which had disrupted the demand and supply of goods and services in the country. In the year 2002-03, Australia had been affected by a severe drought condition which caused inflation, lower income for farmers, increase in food and livestock prices, lesser crop growth, to name a few. This paper aims to analyze the impact of drought on the macroeconomic conditions of Australia, and how it can be mitigated with the help of government intervention and the use of certain tools like economic principles, policies, and other important ways.

Part 2: Analysis

A: Tools of analysis

Application of economic principle

The change in pattern of climate in any part world can lead to drought. Lack of precipitation and extensive use of water can lead to drought in any region or country of the world. There are other natural disasters like tornadoes, earthquakes, floods, etc they seem to occur over finite period of time and leads to a big damage, however drought happens slowly and the symptoms along with the impacts can be hardly seen.

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