Question
Due to COVID-19, growth in Australia's major trading partners is expected to slow significantly over the next couple of years. Further US-China tariff measures came
Due to COVID-19, growth in Australia's major trading partners is expected to slow significantly over the next couple of years. Further US-China tariff measures came into effect in the past two years, and trade restrictions appear to be weighing on export orders for some economies. The possibility of trade protectionism escalating further presents a significant downside risk to global growth.
B. Using the Open Economy Macroeconomic model, illustrate and explain the long-run impacts of a decline in the rate of economic growth of Australia's major trading partners on real interest rate, net foreign investment (NFI), and real exchange rate in Australia. [6 marks]
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