Q3 - Contractionary monetary policy in Australia (& US) to a positive shock [18 marks] It is evident that Central Banks in advanced capitalist nations such as Australia are serious about reducing annual CPI inflation, which was 5.4 per cent in the September 2023 quarter. Raising the cash rate quite sharply can be an effective tool at reducing medium- and long-term inflation expectations, but this has its implications-as pointed out in the following articles (listed in chronological order): For 3a, Ainsworth, Kate (2023) 'Reserve Bank unlikely to lift rates in October despite inflation uptick as more households brace for mortgage cliff', ABC News, 27th September, available: https://www.abc.net.auews/2023-09-28/risk-of-interest-rate-rise-rba-inflation-uptick-mortgage-cliff/102873640 Ryan, Peter (2023) 'A rising number of households on the cusp of financial stress, but RBA says banking system isn't at risk', ABC News, 6th October, available: https://www.abc.net.auews/2023-10-06/rising-number-of-households-in-financial-stress-says-rba/102942306 For 3b, Ziffer, Daniel (2023) 'Aussie dollar slump brings travellers pain and gain, but builds pressure on inflation and interest rates', ABC News, 22" August, available: https://www.abc.net.auews/2023-08-22/aussie-dollar-slump-brings-pain-to-travellers/102757420 Taylor, David (2023) 'Analysts warn the Australian dollar could slump further as stubborn inflation pushes global interest rates higher', ABC News, 3"d October, available: https://www.abc.net.auews/2023-10-03/the-drum-aus-dollar-falls-against-usdollar-record/102930254 a) Elaborate in words on the different ways in which Australian households with a housing loan (more vs. less credit-constrained) respond to an increase in their mortgage repayments. [250 or so words should be sufficient for Q3a] 4 marks for quality of analysis b) For both Australia and the US, present data in a simple table of (i) the cash rates and (ii) the exchange rates (expressed in AUD terms) for two points in time over this 18-month period: late-March 2022 and late-September 2023. Comment on the changes in the Australian dollar as the Reserve Bank of Australia (RBA) has followed suit in raising its own cash rate-and identify and describe one winner and one loser from the change in AUD. [250 or so words should be sufficient for Q3b] 6 marks for presentation of data and quality of analysis c) Use the multiplier AD model and Phillips curve diagram to illustrate and explain in detail how the aggregate demand function in the Australian economy is expected to shift by the end of next year if the RBA's goal is to get the unemployment rate from 3.5% up to 4.5%. [350 or so words should be sufficient for Q3c] 8 marks for quality of analysis, including linked diagrams