HI5003 Economics For Business Assessment Task

Question 6: Week 11 Question 1, (11 marks)

Suppose, initially the Australian economy is at full employment (in other words the economy is at the potential GDP). Using AD-AS model, explain how would each of the following events affect the economy both in the immediate and in the long term.

1. A slowdown in China’s economic growth due to the sub-prime crisis in the US. (3.5 marks)
2. Union wage settlements push the wage rate up. (4 marks)
3. An increase in consumer confidence. (3.5 marks)

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