Answer to Question #47531 in Macroeconomics for Albert Ai
As a result Australia experiences a significant decline in the rate of inflation
Using the aggregate demand - aggregate supply framework, consider the likely response of the Australian economy in terms of the rate of inflation, the level of real GDP and the unemployment rate in both the short run and the long run.
Your answer should be in two parts considering first, the outcomes without the lower inflation rate causing a change in potential output and then secondly, allowing for such a change in potential output.
Over 20 percent of the index is based on items sensitive to energy prices and transportation.
The level of real GDP will also rice, because transportation costs will decrease significantly. The unemployment rate will also fall, as due to the real GDP increase the more jobs will be available in the economy.
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