Using the AEM, describe the likely effects on Australian aggregate output in the short run in each of the following circumstances. Provide brief explanations. (2 points each)

a) There is deep recession in Europe.

b) (Australian) housing values rise above their trend.

c) Mortgage lenders (in Australia) raise interest rates.

d) The (Australian) government decides to close 20 percent of its military bases around the country.

e) The long-run interest rate rises.

Answer rating: 100% (QA)

a A recession in Europe a trading partner will reduce GDP in Europe which will decrease European imp... View the full answer