In 2021, (almost after the COVID-19 related lockdowns were relaxed in Australia) Australian construction industry was facing high demand resulting into a boom in the construction of new housing. This can partly be attributed to the generous economic stimulus packages given by the government. Using the AD and Phillips curve model, show the state of the Australian economy assuming having a stable target inflation of 2% prior to COVID-19. Now, in the same model, show and explain the impact of the above-mentioned construction boom on employment and inflation levels in Australia resulting in the current state of the economy (2022- 2023).

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The AD Aggregate Demand and Phillips Curve models are useful tools to analyze the macroeconomic conditions of a country The Aggregate Demand AD curve ... View the full answer