Suppose the Following Table Illustrates the Values of Real and Potential

question 62

Essay

Suppose the following table illustrates the values of real and potential GDP if the Reserve Bank of Australia (RBA)does not change its current monetary policy to be more contractionary or expansionary.
$$\begin{array} { | c | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Potential GDP } \\\text { (dollars) }\end{array} & \text { Real GDP (dollars) } & \text { Price level } \\\hline 2017 & 1.50 \text { trillion } & 1.50 \text { trillion } & 150 \\\hline 2018 & 1.56 \text { trillion } & 1.53 \text { trillion } & 153 \\\hline\end{array}$$ If the RBA wants to keep real GDP at its potential level in 2018,should the RBA use a contractionary or expansionary policy? How should it conduct open market operations to achieve its goal?
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