Using Aggregate Demand and Aggregate Supply analysis (including a graph), explain:

(a)how a decrease in global demand for iron ore (which Australia is a large exporter of) could cause a recession in Australia, with output below its long-run equilibrium

(b)how the economy will move back to long-run equilibrium over time without government intervention

(c) how expansionary fiscal policy could be used to move the economy back to long run equilibrium and end the recession sooner

Note: Use the static AD-AS model (i.e. assume LRAS does not tend to increase over time as the economy grows) and assume that the Australian economy is initially at long-run equilibrium.