Question: Using Aggregate Demand and Aggregate Supply analysis (including a graph), explain: how a decrease in global demand for iron ore (which Australia is a large

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

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

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