a)

The government budget will be in deficit due to the JobKeeper Payment scheme. This may reduce government spending on infrastructure and cause government to increase personal income tax and business tax in the near future.

Suppose that Australia is a closed economy, use the dynamic AD, SRAS and LRAS framework to analyse and demonstrate the impact of the JobKeeper Payment scheme on the level of output (or real GDP), unemployment, and inflation.

b)

Suppose that Australia is an open economy. The US Federal Reserve injected more than $1.5 trillion into the markets in 2020. How do you think this could affect your results in (a)?