Posted: May 24th, 2016
Suppose the following table illustrates the values of real and potential GDP and the price level, if the Reserve Bank of Australia (RBA) does not change its current policy to be more contractionary or expansionary. Suppose that the RBA uses an appropriate policy and is successful in keeping real GDP at its potential level in 2014.
Year Potential GDP Real GDP Price level 2013 $1.44 trillion $1.44 trillion 144 2014 $1.47 trillion $1.45 trillion 146
State whether each of the following will be higher or lower than if the RBA had taken no action:
3a. Real GDP
3b. Potential GDP
3c. The price level
3d. The unemployment rate
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