Problem
I. "The bushfires burned more than 46 million acres (72,000 square miles) - roughly the same area as the entire country of Syria". Using the case study, examine the economic impact of the bushfires on Australia.
II. The Australia Federal Government pledged AUD2 billion to help "ensure that the families, farmers and business owners hit by these unprecedented bushfires would get the support they needed as they recover." Assume due to the devastation of the bushfires, the marginal propensity to consume was 90%. Answer the questions that follow.
i. Calculate the total effect of the spending multiplier of the government pledge on the GDP growth of Australia.
ii. Examine the overall multiplier effect of the government pledge on the Australia economy.