BEA111Assignment2_Macroec: X @ BEAT1Assignment2_Macroec: X H Course Hero x | + v & @ File | /Usersimacbook/Downloads/BEA111Assignment2_Macroeconomics.pdf Mo @ N 0O o : BEA111Assignment2_Macroeconomics.pdf L'k BEA111 Introduction to Markets and the Economy Assignment 2 Question 4 (Total: 25 Marks) In 2013, the Australian economy experienced a mining boom. a. During the mining boem period, what effect would a change in households' and firms' expectations have had on the aggregate demand curve? [4 marks] Using the dynamic aggregate demand and aggregate supply model, explain the effect of aggregate demand increasing faster than potential GDP on price level and actual GDP. [5 marks] Given the situation in part (b), if the Reserve Bank of Australia wants to move real GDP to its potential, should it use expansionary or contractionary policy? In your answer, make sure you explain in which direction the RBA would move the cash rate to achieve its policy goal. [4 marks] Explain how the RBA would use the open market operaticns to achieve its policy goal described in part {c). [4 marks] Briefly discuss the effect of the cash rate changes in (c) and (d) on consumption and investment spending. [4 marks] At various times in recent years, the major banks in Australia pursued their own interest rate policy and increased their interest rates by more than the amount by which the RBA increased the cash rate. Would such actions mean that monetary policy has become ineffective? {4 marks]