Please address all the questions. Thank you so much

1. Assume that the economy is open. The Reserve Bank undertakes contractionary monetary policy. What is the effect of this policy change? Begin by stating your assumption about:

(i) the economy's initial level of GDP relative to potential GDP and

(ii) price level (and inflation rate) relative to the central bank's target.

2. Suppose that the government announces it will increase spending on digital infrastructure to support innovation in the next year.

(i) Illustrate and explain the effect of this policy in the short-run.

(ii) What is the long-run effect likely to be on output and the price level?

3. Assume that the economy is open. Suppose that incomes in foreign countries decline.

(i) What effect is this likely to have on the level of domestic exports to the rest of the world? (ii) Illustrate and explain the effect of this shock on output and the price level.

(iii) How might this shock affect interest rates?

4. Suppose that the government implements a major programme to receive and up-skill refugees, such that:

public spending on education increases, resulting in an increase in the stock of human capital

the labour force increases by the same proportion as the stock of human capital

the price level changes from 100 to 105.

1. Illustrate and explain the effect of this shock on output and the price level.
2. What are the effects of these changes on inflation

5. Suppose that:

a natural disaster destroys some of the capital stock of an island nation

households respond to the disaster by reducing saving much more than consumption

the government increases spending to provide emergency supplies and begin rebuilding infrastructure

1. Illustrate and explain the effect of this shock on output and the price level.
2. What are the effects of these changes on inflation?

6. Suppose that there is an expansion of private consumption due to increased optimism about future growth prospects for the economy.

(i) Illustrate and explain the effect of this shock in the short-run.

(ii) What is the long-run effect likely to be on output and the price level?