45\" line Y1 YE Real GDP 25. Describe the variables in the economy above. Suppose Y1 is the current level of production relative to the short-run equilibrium, YE. Is aggregate expenditure AE less than or greater than real GDP Y? What actions would rms take and how would AE = YE overtime. Explain. Clearly state the key assumption upon which your explanation depends on. 45\" line YE Y1 Real GDP 26. Describe the variables in the economy above. Suppose Y1 is the current level of production relative to the short-run equilibrium, YE. Is aggregate expenditure AE less than or greater than real GDP Y? What actions would firms take and how would AE = YE overtime. Explain. Clearly state the key assumption upon which your explanation depends on. 27. Draw AD-AS diagram of the Australian economy at long-run equilibrium. Use the diagram to illustrate your answers to the questions below. a. Describe the variables in the economy. State the type of unemployment rate that exists. The government has increased its purchases of goods and services. Is this action discretionary fiscal policy or an automatic stabiliser? Explain. Describe the likely impact on the unemployment rate and inflation rate? c. Describe the type of monetary policy the RBA would implement to overcome the impact you identified in part (b). In your answer refer to the monetary policy transmission process. d. Explain the long-run impact of the RBA's monetary policy on real GDP, inflation rate, and unemployment rate. 28. Define the CPI. Explain how the CPI is calculated. Explain how inflation rate is calculated. 29. Australia and the USA are trading partners, and both countries operate floating exchange regimes. a. Suppose Australia's inflation rate becomes higher than USA's inflation rate. Discuss how higher relative Australian inflation rate would impact the Australian dollar (AUD) and the USD. Illustrate your answer with a clearly labelled demand and supply diagram of the Australian dollar. What would be the impact on Australia's NX? b. Suppose Australia's real GDP growth rate becomes higher than USA's real GDP growth rate. Discuss how higher relative Australian real GDP growth rate would impact the Australian dollar (AUD) and the USD. Illustrate your answer with a clearly labelled demand and supply diagram of the Australian dollar