Suppose the Following Table Illustrates the Values of Real and Potential

question 66

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 its current policy to be more contractionary or expansionary.
$$\begin{array} { | c | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Potential GDP } \\\text { (dollars) }\end{array} & \text { Real GDP (dollars) } & \text { Price level } \\\hline 2017 & 1.51 \text { trillion } & 1.51 \text { trillion } & 150 \\\hline 2018 & 1.54 \text { trillion } & 1.56 \text { trillion } & 155 \\\hline\end{array}$$ If the RBA wants to keep real GDP at its potential level in 2018,should the RBA use a contractionary or expansionary policy? Should it raise or lower its interest rate target? How should it conduct open market operations to achieve its goal?
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Definitions:

Articles of Incorporation

A document that establishes a corporation's existence, filed with a government body in the country or state of incorporation.

Corporate Bylaws

Formal rules governing the management and operations of a corporation, established by the board of directors.

Intrinsic Value

The inherent worth of a company, stock, or other financial asset, determined through fundamental analysis without reference to its market value.

Going Public

The act of selling stock to the public at large by a closely held corporation or its principal shareholders.