Assume that the Australian economy originally starts at the long-run equilibrium.

The shock in focus is theintroduction of robots to undertake manual tasks and replace low-skilled workers.

In 2019, Oxford Economics forecasted that approximately 20 million jobs around the world could be replaced by robots by 2030. This trend will exert sweeping and profound impacts on economies around the world, including Australia.

Required:

1. Considering the shock above, point out how aggregate demand (AD), short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) will be affected. (1 mark)
2. Explain clearly in words the reasons behind the effects on AD, SRAS and LRAS, as pointed out in prompt #1. (1 mark)
3. Describe how the AD, SRAS and LRAS curves will shift following the shock above. (0.5 mark)
4. Explain clearly in words how the key macroeconomic variables (i.e. average price level, inflation rate, real GDP and unemployment rate) will be affected by the shock above.(0.5 mark)