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i dinde understand this exercice Two years ago, Australia created a record of having the longest expansion without a recession, perhaps in world history. During

i dinde understand this exercice

Two years ago, Australia created a record of having the longest expansion without a recession, perhaps in world history. During the early part of this decade, Australia experienced a mining-led export and investment boom. Consider the following description of the Australian economy. The components of planned demand are

C = 11000+ 0.5(Y-T)

T = 6000

I = 7000 - 20000 r

G = 6000

X= 9000

M = 7000

nfi = -1000

Initially r = 0.05

Full employment output is 40000 and the natural rate of unemployment is 6%

(a) What is the equilibrium output level and the output gap in Australia? What is the government surplus or deficit, and the current account?

(b) What is the multiplier for this economy?

(c) What is the unemployment rate ?

(d) The central bank is concerned about rising inflation and decides to raise interest rates so that unemployment increases to 5%.At what level must the central bank set interest rates to achieve this result?

(e) During an election year, the government decides to cut taxes by 500.If the central bank decides it wants the output gap to be zero, what will happen to interest rates and investment spending?

(f) Why might a tax increase be a better idea than a tax decrease during the boom?

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