Economics Practice Questions

Read this article from ABC News to help answer the questions below

https://www.abc.net.au/news/2019-05-07/retail-sales-and-trade-balance-march- 2019/11086486?section=business

https://www.abc.net.au/news/2020-04-22/retail-sales-surge-in-march-toilet-paper- rise-pasta-sales-double/12172606

a)Draw an AS-AD diagram for Australia's economy, showing an initial long run equilibrium. (2 mark)

b)Explain the impact of the panic buying in March on output and inflation in the short-run, including showing this on your AS-AD diagram. (3 marks)

c)Looking at each of the aggregate demand components, explain what is the likely impact of COVID-19 on aggregate demand after the panic buying has stopped. Illustrate your answer using a diagram. (5 marks - 1 for each component and 1 for the diagram)