Principles of Economics
Summer A 2019/2020
Short-answer Assignment (20% of final mark)
With reference to the following diagram (numbers are in billions):
(a) If real GDP were initially $200, what would tend to happen to consumption expenditure and why?
(b) If real GDP were initially $900, what would tend to happen to consumption expenditure and why?
(c) According to Keynesian theory, if real GDP were $500 and government expenditure increased by $80, what would be the new real GDP?
On September 19, 2019, The Sydney Morning Herald reported: “Unemployment lifts to 12-month high as full-time jobs fall”. Explain why, as is reported in the article, the Reserve Bank of Australia would be interested in the national unemployment rate?