Suppose the Following Table Illustrates the Values of Real and Potential

question 73

Essay

Suppose the following table illustrates the values of real and potential GDP and the price level, if the Reserve Bank of Australia (RBA)does not change their current monetary policy to be more contractionary or expansionary.

Suppose that the RBA uses an appropriate policy and is successful in keeping real GDP at potential in 2017. Discuss the type of monetary policy that the RBA should adopt, explaining the effect of the policy on real GDP, the price level and employment. Use a dynamic aggregate demand and supply model to illustrate your answer.
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Definitions:

Lymph Tissue

Specialized connective tissue that contains large numbers of lymphocytes and is involved in the immune response and the maintenance of bodily fluids levels.

Oral Cavity

The mouth, or buccal cavity, which is the first part of the digestive system and where the mechanical breakdown of food begins.

Blood Pressure

The force exerted by circulating blood upon the walls of blood vessels, essential for the functioning of the circulatory system.

Hormones

Biochemical substances produced in small amounts by specialized cells in organisms, transported in tissue fluids to stimulate specific cells or tissues into action.