Consider that the Australian economy is initially at a long run equilibrium. Then, China one of Australia’s major trading partners experiences strong GDP growth and increase their demand for Australia’s exports. What will happen in the short run?

Question

Answer

There will be a contractionary output gap and inflation will be unchanged.

Answer

There will be an expansionary output gap and inflation will be unchanged.

Answer

There will be a contractionary output gap and inflation will fall.

Answer

There will be an expansionary output gap and inflation will rise.

Answer

Nothing will happen in the short run.

Crowdly

Consider that the Australian economy is initially at a long run equilibrium. The...

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