The focus of this question is on the Australian economy in the first half of 2022.

The following two shocks occurred in the econary during this period.

i. Most of COVID related social distancing policies (e.g., lockdown, density limits) were lifted. This paved the way for strong and sustained spending across the economy. Increases in spending were especially significant in the caf, restaurant, travelling and retail sectors.

ii. The economy continued to suffer from supply chain disruption caused by COVID. Costs for firms to import key materials and machinery from overseas remained hish due to elevated international freight rates.

'The disruption was further exacerbated by the ongoing Russia - Ukraine war which sent fuel prices flying since February 2022.

Required:

a) Considering the two shocks above, point out how Aggregate Demand, Short run Aggregate Supply and Long run Aggregate Supply will be affected

b) Explain clearly in words the reason behind the effects on Aggregate Demand. Short-run Aggregate Supply and Long run Aggregate Supply, as pointed out in (a)

c) Explain clearly in words how the key macroeconomic variables (i.e.. average price level, inflation rate, Real GDP and unemployment rate) will be affected by the shock above

d) A prominent problem facing the Australian economy during the first half of 2022 was an acute "labour shortage" (firms could not recruit enough staff to meet their day-to-day operation demand)

Suggest ONE policy that you think would help address this labour shortare problem.

Explain elearly in words how your suggested policy would help fix the issue