Questions 12-17 relate to News Media 3.

Read the article"Why the RBA Plans to Keep Rates Low for Years"by John Kehoe (Link:https://www-proquest-com.ezproxy.lib.uts.edu.au/docview/2497690100/92F7D13A4A1C4F10PQ/1?accountid=17095Links to an external site.orhttps://bit.ly/2R0gYD1(Links to an external site.)) and answer the questions.

13. According to the article, "The RBA has said it will only lift interest rates when inflation is sustainably within the 2-3 per cent band... As an aside, if the RBA gets worried about surging house prices and risky credit growth, before considering raising interest rates the central bank will push the prudential regulator to put speed limits on home loans."

The RBA is hesitant to _________ [ Select ] ["raise", "lower", "maintain current"] interest rates because though it may dampen surging house prices and risky credit growth, it would also ________ [ Select ] ["reduce", "increase", "maintain"] growth in other sectors of the economy, like household consumption. As a result, RBA would be interested in targeting the housing market by imposing speed limits on home loans, which ___________ [ Select ] ["loosen", "tighten", "maintain current"] lending standards.

14. If wages grew, then according to the article, "The wage costs of business would rise. These forces would push up inflation and enable the RBA to lift the cost of borrowing."

An increase in wage costs for businesses would cause the Aggregate Supply curve to ___________

[ Select ] ["shift to the right", "shift to the left", "remain unchanged"] . This increases _______ [ Select ] ["demand-pull", "cost-push", "profit-push"] inflation and __________ [ Select ] ["increases", "lowers", "would not change"] GDP.

15. According to the article, "the RBA has realised unemployment needs to be much lower to stimulate material wages growth." This means that the:

Group of answer choices:

a) Natural rate of unemployment needs to be higher

b) Natural rate of output needs to be lower

c) The economy would operate above the natural rate of output

d) Workers have less bargaining power with firms

16. According to the article, "The globalisation of labour and product markets, robots replacing workers and decline of trade union power has reduced the bargaining power of workers in wage negotiations." This implies that:

Group of answer choices:

a) Nominal wages would fall

b) Prices would rise

c) The labour market would tighten

d) All of the options

17. According to the article, "In the United States just before COVID-19 struck, unemployment fell to 3.5 per cent in late 2019, generating reasonable wages growth of 3.5 per cent. Inflation rose. The US Federal Reserve was hiking interest rates. But that was achieved with a massive pro-cyclical fiscal stimulus by President Donald Trump, comprising trillions of dollars in corporate and personal income tax cuts."

The corporate and personal income tax cuts are an example of __________ [ Select ] ["expansionary monetary policy", "contractionary monetary policy", "expansionary fiscal policy", "contractionary fiscal policy"] . This would __________ [ Select ] ["increase", "decrease", "maintain current"] disposable income and therefore __________ [ Select ] ["increase", "decrease", "maintain current"] household consumption and GDP. As GDP ________ [ Select ] ["increases", "decreases", "remains unchanged"] , aggregate demand __________

[ Select ] ["increases", "decreases", "remains unchanged"] . This causes unemployment to _________ [ Select ] ["fall", "rise", "remain unchanged"] and prices to ________ [ Select ] ["fall", "rise", "remain unchanged"] .

In response, the Federal Reserve (America's central bank) would raise interest rates. This outlines the __________ [ Select ] ["multiplier effect", "crowding out effect", "wealth effect", "exchange rate effect"] .