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ECC1100 - Principles of macroeconomics - S1 2025

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Explain the dual mandate of the Central Bank and how that how interest rate changes affect Aggregate Demand.

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Part A

The government provides unemployment benefits as a payment to eligible unemployed persons. Explain whether these unemployment benefit payments are an example of an automatic stabilizer in the economy. (5 marks)

Part B

Explain how a change in taxes affects the aggregate demand (AD). (5 marks)

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Part A

Explain the effect of a decrease in capital inflow (from Japan into Australia) on the value of the Australia dollar (relative to the Japanese Yen) in the exchange rate market. The diagram is provided below for reference. (5 marks)

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Part B

Explain the current account and the financial account in Balance of Payments. Explain how capital flows are recorded in the Balance of Payments. (5 Marks)

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Suppose the Aggregate Demand (AD) increases as shown by the right shift (from AD1 to AD2 ) in the diagram below.

Using diagrams provided below, explain the effect of this increase in AD on price level and real GDP.

In your answer carefully explain why the effects differ in the medium run and the long run.

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Q19

19a) Explain what are automatic stabiliser using ONE example of an automatic stabiliser (4 marks).

19b) Economy is at point A as shown in the diagram below. If the government increases its spending by $100, explain the effect of this increase in the short run and in the long run. (6marks)

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Question 16

Part a) Explain if there is any unemployment in the economy when there is no output gap (actual output= potential output)? (5 marks)

Part b) Explain why the aggregate demand curve is downward sloping? (5 marks)

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Question 17

Part a) Explain how investment depends on the costs and benefits of the investment. (4 marks).

Part b) Use either figure 1 or figure 2 below to explain the effect of an increase in business expectations of higher future profits on the loanable funds market. Explain which figure you use and why? (6 marks)

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Q19

19a) Explain what are automatic stabiliser using ONE example of an automatic stabiliser (4 marks).

19b) Economy is at point A as shown in the diagram below. If the government increases its spending by $100, explain the effect of this increase in the short run and in the long run. (6marks)

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Question 18

Show the effect on an increase in the number of employed workers on economic growth.

In your answer, carefully explain the effect on the average labour productivity, real GDP and real GDP per capita.

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Question 16

Part a) Explain if there is any unemployment in the economy when there is no output gap (actual output= potential output)? (5 marks)

Part b) Explain why the aggregate demand curve is downward sloping? (5 marks)

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