a. In the following graph, suppose the Australian economy moves from point A in year 1 to point B in year 2. Using the graph, briefly explain your answers to each of the questions.

(i) What is the growth rate in potential GDP from year 1 to year 2?

(ii) Is the unemployment rate in year 2 higher or lower than in year 1?

(iii) What is the inflation rate in year 2?

(iv) What is the growth rate of real GDP from year 1 to year 2?

LRAS1 LRAS2 Price level SRAS1 SRAS2 114 B 112 AD2 AD L 0 $1120 1140 1160 Real GDP (billions of dollars)