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ECON102: Principles Of Macroeconomics

tag 0 Download 2 Pages / 415 Words tag 12-11-2020
  • Course Code: ECON102
  • University: Saylor Academy
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  • Country: United States


(1) The Australian government has abandoned its policy of returning the budget to surplus, because of unexpected fall in tax revenues. Suppose a decrease in planned investment and exports caused the decline in tax revenues.
(a) Use the AD-AS supply model to explain how a decrease in investment and exports would change PAE and equilibrium output.
(b) What would be the impact on national saving? Use the saving equation and diagram to illustrate your answer.
(c) What type of monetary policy could the RBA implement to offset the impact of the decline in investment discussed in part (a)? Your answer should include a discussion of the RBA’s policy reaction function.
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