2019: Potential GDP $1.45 trillion, nominal GDP $2.103 trillion, price level 145

2020: Potential GDP $.148 trillion, nominal GDP $2.161 trillion, price level 148

Using the information given in the above table answer the following:

a. If the RBA wants to keep real GDP at its potential level in 2020, should the RBA use a contractionary or expansionary policy?

b.Should it raise or lower its interest rate target?

c. How should it conduct open market operations to achieve its goal?

d.Suppose that the RBA uses the policy identified in part a. and is successful in keeping real GDP at its potential level in 2020. State whether each of the following will be higher or lower than if the RBA had taken no action:

i.Real GDP

ii.Potential GDP

iii.The price level

iv.The unemployment rate