Qu.6* SupposethefollowingtableillustratesthevaluesofnominalandpotentialGDPandthe price level, if the Reserve Bank of Australia (RBA) does not change their current policy to be more contractionary or expansionary.

Using the information given in the above table answer the following:

Year Potential GDP Nominal GDP Price level

2019 $1.45 trillion $2.103 trillion 145

2020 $1.48 trillion $2.161 trillion 148

1. If the RBA wants to keep real GDP at its potential level in 2020, should the RBA use a
2. contractionary or expansionary policy?
3. Should it raise or lower its interest rate target?
4. How should it conduct open market operations to achieve its goal?
5. Suppose that the RBA uses the policy identified in part a. and is successful in keeping
6. real GDP at its potential level in 2020. State whether each of the following will be higher or lower than if the RBA had taken no action:
7. i. Real GDP.
8. ii. Potential GDP.
9. iii. The price level.
10. iv. The unemployment rate.