1. Shifting the Demand and Supply Curves, Economic Statements, the Circular Flow

Model, and the Five Fundamental Questions

Read the article on the next page, "Australia Business Activity Rebounds in Jan on

Strong Sales" and answer the following questions related to the article.

Complete parts a, b, and c.

1. The below article depicts a situation where both the supply and demand curves

will shift, as businesses and households are impacted, as discussed in the article.

State what direction both curves will shift, based upon the index measures

covered in the article and why, using specific information from the article to

support your reasoning.

Based upon the shifts of both the supply and demand curves, what will the effect

be of these two shifts occurring simultaneously, or at the same time, on the

equilibrium quantity? Will the equilibrium quantity decrease, increase or be

indeterminate?

Based upon the shifts of both the supply and demand curves, what will the effect

be of these two shifts occurring simultaneously, or at the same time, on the

equilibrium price? Will the equilibrium price decrease, increase or be indeterminate?

1. Would stating that "the pace of ongoing supply chain healing and strength of wage growth will be important in shaping how much further cost pressures ease," be an example of a positive economic statement or a normative economic statement?
2. Explain how this article shows businesses answering one of the Five Fundamental

Questions, covered in chapter 2 of the Week 5 Notes.State the question and

explain how the question is being answered.

Australia business activity rebounds in Jan on strong sales - NAB

SYDNEY, Feb 14 (Reuters) - Australian business conditions rebounded sharply in January after three months of slowdown while cost pressures picked up again, a surprising sign of strength that could add to the case for yet more rises in interest rates.

Tuesday's survey from National Australia Bank Ltd (NAB)(NAB.AX)showed its index of business conditions had risen 5 points to +18 in January, well above its long-run average.

The measure of confidence climbed 6 points to +6, led by gains in the wholesale and the transport and utilities industries.

"The improvement in confidence suggest firms have a more optimistic outlook as concerns about global growth prospects ease, while strong conditions are also providing evidence that the economy is more resilient than previously expected," said Alan Oster, NAB's chief economist.

The survey showed a notable 8-point pick-up in its sales index to a very high +28 in January, supported by historically low unemployment and rapid population growth.

Measures of employment edged up 2 points to +10, while profitability rose 4 points to +17.

The resilience of demand was one reason the Reserve Bank of Australia (RBA) lifted interest rates to a decade high of 3.35% last week and warned further increases would be necessary to contain inflationary pressures.

The NAB survey showed labor costs in November to January had been 2.7% higher than in August-October, when they were up 2.1% from the previous three months. The latest rise is well down from the 4.6% peak rate seen in May-July.

Purchase costs and retail prices also picked up, but again were well short of last year's peaks.

"From here, the pace of ongoing supply chain healing and strength of wage growth will be important in shaping how much further cost pressures ease, while the resilience of consumption will continue to be tested as higher rates are passed through to households," said Oster.