Question 2(Total 10 marks)

Employ the aggregate demand and supply model to analyse the consequences for real GDP and the general price level of the following scenarios for the Australian economy. Evaluate these scenarios assuming: i) the economyinitiallyoperates in the intermediate range of the aggregate supply curve; and ii) the economyinitiallyoperates in the vertical range of the aggregate supply curve. In your response clearly state your assumptions, support your arguments with recent evidence on the scenarios and illustrate your answers with diagrams.

Scenarios

(a)The impact of the ban on international tourists visiting Australia.

(b)A fall in some Australian agricultural exports to China due to an increase in some tariffs and import restrictions.

(c)The increase in demand for domestic tourism as Australians are prevented from travelling overseas.

(d)A fall in permanent migration into Australia.

Use diagrams where appropriate to enhance and explain your response.Provide supporting evidence and references where appropriate to justify your arguments.