The table below includes hypothetical economic information for the Australian Economy.

Year1Year2

Economic Growth3.5%-1.0%

Unemployment4.5%6.7%

Inflation4% 0.5%

Investment Expenditure ($ billions) 25.6 21.0

Consumption Expenditure ($ billions) 59.255.9

Exports($ billions) 16.519.2

Imports($ billions) 18.316.8

• Describe the changes to the internal balance between year 1 and year 2.
• How are changes in the country's internal balance likely to have affected government tax revenue and government welfare expenditure between year 1 and year 2? How is the budget outcome likely to be affected if the Government budgeted for a deficit.
• How have the changes in the country's internalbalance likely to have influenced the level of imports and exports between year 1 and year 2?
• What is the likely effect of an increase in government infrastructure spending in the economy.
• Explain how Monetary Policy may have been used to contribute to the changes in internal balance between year 1 and year 2.