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The latest residential property price data from the Australian Bureau of Statistics show that housing prices across the nation rose by more than 20 percent
The latest residential property price data from the Australian Bureau of Statistics show that housing prices across the nation rose by more than 20 percent last year. Housing is the most important source of household wealth. Using the AD-AS model, predict how this development affects output and the price level in the short run and the long run, assuming that policymakers take no action. How would your answers differ if the central bank responded with a contractionary monetary policy?
(20 marks)
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