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The hypothetical information in the following table shows the situation in 2020 if the RBA does not use monetary policy. Potential GDP Real GDP Price

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The hypothetical information in the following table shows the situation in 2020 if the RBA does not use monetary policy. Potential GDP Real GDP Price Level $1?0[) billion $1TOO billion 1 10 2020 $1760 billion $1650 billion 105 a) If the RBA wants to keep real GDP at its potential level in 2020, should it use an expansionary monetary policy or a contractionary monetary policy? (3 marks} b) Should the RBA be buying nancial securities or selling them and how it affects interest rates? (2 marks) c) If the RBA's policy is successful in keeping real GDP at its potential level in 2020, explain what would happen in the goods and services market (AD). {3 marks}

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