Question: question is as follows Question 23 (30 marks) Answer each part by using well-labelled graphs for the lS-LM. WS-PS and AS-AD models: a) Assume that

question is as follows

Question 23 (30 marks) Answer each part by using well-labelled graphs for the lS-LM. WS-PS and AS-AD models: a) Assume that Australian government has made it very difcult for refugees (who are prepared to work at lower wages) to obtain work permits to enter the workforce. Explain how natural rate of unemployment would change. (8 marks) b) Assume that the RBA decided to increase its price target, analyse how the economy would adjust to a medium-run equilibrium. (8 marks) c) Would your answer to (b) change if the economy was in a liquidity trap? Explain. (7 marks) d) Suppose the RBA tries to persuade everyone that it is necessary that the Bank to decrease the cash rates. This would decrease people's expectations of future interest rates. Explain what the effect would be today on equilibrium output. (7 marks)

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