Briefly explain each of the types of unemployment. (10)
What is the relationship of each type of unemployment to the natural rate of unemployment? (10)
Question 2 (20 marks)
Read "Does a stock market crash affect the economy?" (Layton et al 2012, pp. 364â€“5)
Immediately following the attack on the US on 11 Sept 2001, the stock markets plunged and many observers expected a recession in the US (and possibly elsewhere).
Q) Using the AD-AS model, explain their prediction.
Note: You may use websites for research however the focus of the assessment is to demonstrate your understanding of the AD-AS model.
Question 3 (10 marks)
Explain how each of the following affects consumption demand:
a) The expectation is that a prolonged expansion will occur in the next year. (2)
b) Stock prices rise sharply. (2)
c) The price level falls by 10%. (2)
d) The interest rate on consumer loans rises sharply. (2)
e) Income taxes decrease. (2)
Question 4 (30 marks)
"The expansionary policies implemented in Australia in 2008/9 by the Rudd Government and the Reserve Bank of Australia were unnecessary and will result in a period of unwanted inflation".
Write a report on the above theme, evaluating whether the above prediction turned out to be true. Use your understanding of Fiscal and Monetary policies studied in this subject to analyse the relevant factors and to come to a conclusion. You are free to critically analyse the statement and provide facts and figures to support your position. Your conclusion should be made in line with your analysis/discussion and the arguments made in the body of your report.
Note: You may use websites such as www.rba.gov.au and abs.gov.au. The focus of the assessment is to demonstrate your understanding of Fiscal and Monetary policies studied in this subject.
Note: A link to assist with report writing is http://bit.ly/FoBAcademic-Writing-Skills
Length: Up to 1000 words including synopsis/summary - excluding tables, graphs, figures, appendices, bibliography.
Question 5 (20 marks)
In Japan, potential GDP is 600 trillion yen (Â¥) and the table below shows Japanâ€™s aggregate demand and short-run aggregate supply schedule.
Price levelÂ Â Â Real GDP demanded (trillions of yen)Â Â Â Real GDP supplied in the shortâ€“run (trillions of yen)
75Â Â Â 600Â Â Â 400
85Â Â Â 550Â Â Â 450
95Â Â Â 500Â Â Â 500
105Â Â Â 450Â Â Â 550
115Â Â Â 400Â Â Â 600
125Â Â Â 350Â Â Â 650
135Â Â Â 300Â Â Â 700
a) Draw a graph of the aggregate demand curve and the short-run aggregate supply curve. (10)
b) What is the short-run equilibrium real GDP and price? (2)
c) Determine and explain the GDP gap. (8)
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