When a pandemic strikes the Australian economy, many businesses are temporarily closed, aggregate demand (AD) falls beca
Posted: Mon May 02, 2022 8:07 am
When a pandemic strikes the Australian economy, many businesses
are temporarily closed, aggregate demand (AD) falls because people
are staying at home rather than spending at those businesses.
Because those businesses cannot produce goods and services, both of
the short-run GDP and the economy’s potential GDP, as reflected in
the SRAS and LRAS curve, fall as well. Use the following graph to
answer these questions.
If the RBA does not take any action, what would have been the
real GDP growth rate and inflation rate in 2020? [2 + 2
marks]
If RBA wanted to keep the actual real GDP at its potential level
in 2019 by implementing an expansionary monetary policy, should
they buy or sell financial securities? Briefly describe the
mechanism by which the policy can prevent a deep recession.
[1 + 5 marks]
Calculate the actual real GDP growth and inflation rate in 2020.
[2.5 + 2.5 marks]
In the long run, will inflation be expected to rise or fall and
why? [5 marks]
LRAS2025 LRAS2019 Price level SRAS2020 SRAS2019 120 - - 1 - - 107 - - 1 1 1 1 100 1 1 1 AD2020 with policy AD2019 1 AD2020 without policy 452865 493000 509677 Real GDP ($ millions)
are temporarily closed, aggregate demand (AD) falls because people
are staying at home rather than spending at those businesses.
Because those businesses cannot produce goods and services, both of
the short-run GDP and the economy’s potential GDP, as reflected in
the SRAS and LRAS curve, fall as well. Use the following graph to
answer these questions.
- When A Pandemic Strikes The Australian Economy Many Businesses Are Temporarily Closed Aggregate Demand Ad Falls Beca 1 (44.93 KiB) Viewed 32 times
real GDP growth rate and inflation rate in 2020? [2 + 2
marks]
If RBA wanted to keep the actual real GDP at its potential level
in 2019 by implementing an expansionary monetary policy, should
they buy or sell financial securities? Briefly describe the
mechanism by which the policy can prevent a deep recession.
[1 + 5 marks]
Calculate the actual real GDP growth and inflation rate in 2020.
[2.5 + 2.5 marks]
In the long run, will inflation be expected to rise or fall and
why? [5 marks]
LRAS2025 LRAS2019 Price level SRAS2020 SRAS2019 120 - - 1 - - 107 - - 1 1 1 1 100 1 1 1 AD2020 with policy AD2019 1 AD2020 without policy 452865 493000 509677 Real GDP ($ millions)