The goods and services tax (GST) was introduced in Australia on 1 July 2000. The preceding months before the GST became
Posted: Thu May 19, 2022 8:38 am
The goods and services tax (GST) was introduced in Australia on
1 July 2000. The preceding months before the GST became active saw
a spike in consumption as consumers rushed to purchase goods that
they perceived would be substantially more expensive with the GST.
The effects of the surging demand on inflation and the central
bank’s policy responses (i.e., cash rate, the policy interest rate
in Australia) are illustrated in Figure 1. Using the AD-AS
frame- work, explain what happened to output and
the price level when Australia introduced GST in
the short run and in the long
run. For simplicity, you may assume that the
introduction of GST had no effects on the supply side of the
economy.
1 July 2000. The preceding months before the GST became active saw
a spike in consumption as consumers rushed to purchase goods that
they perceived would be substantially more expensive with the GST.
The effects of the surging demand on inflation and the central
bank’s policy responses (i.e., cash rate, the policy interest rate
in Australia) are illustrated in Figure 1. Using the AD-AS
frame- work, explain what happened to output and
the price level when Australia introduced GST in
the short run and in the long
run. For simplicity, you may assume that the
introduction of GST had no effects on the supply side of the
economy.