Consider the following table that reports selected macroeconomic data for Australia for 2015and 2016.

Australia

2015 2016

Labour Force Participation rate (LFPR) 64.72% 65.27%

Employed persons (E) 10,000,000 10,100,000

Unemployed persons (UE) 780,000 600,000

Gross Domestic Product (GDP) ($m) - 220.5

Consumer Spending (C)($m) 118.87 121.84

Investment Spending (I) ($m) 30 44.53

Government Spending (G) ($m) 41.8 42.85

Export (X) ($m) 15.2 13.6

Import (M) ($m) 2.96 2.32

Inflation rate 2.4% 5.5%

Answer the following questions:

A)Define real GDP and explain what it means. Calculate real GDP for 2015.(3 marks)

B)Calculate the economic growth rate between 2015 and 2016.(3 marks)

C)Calculate the unemployment rate for 2015 and 2016.(2 marks)

D)Given that the LFPR increased from 64.72% to 65.27% and the changes in the unemployment rate between 2015 and 2016, what does this say about employment in Australia?(3 marks)

E)Is Australia above or below full employment in 2016? Why? Show this using an AD/AS model.(6 marks)

Q2 What are monetary and fiscal policy and how do they affect the components of aggregate demand? For the Australian economyin the previous question,what monetary policy should the central bank undertake in 2016 to address the high inflation?(9 marks)

Q3

The following table reports an economy's aggregate demand (AD) and short-run aggregate supply (SAS) schedules.

Price Real GDP Real GDP

level AD SAS

150 2,000 1,200

160 1,800 1,400

170 1,600 1,600

180 1,400 1,800

190 1,200 2,000

Answer the following questions:

A)What is the short-run macroeconomic equilibrium? Show your answer in a diagram.(3 marks)

B)If, at every price level, real GDP supplied decreased by $400 billion, what would the new short-run macroeconomic equilibrium be? Show your answer in a diagram.(5 marks)

C)List two factors that might have shifted SAS to the left.(2 marks)