What are the current rates of unemployment and inflation in Australia? If the NRU is 4.5% how much of the current unemployment can be contributed to cyclical factors? Why is it important to take into account changes in the participation rate and in the ratio of full to part time employment in assessing the economic and social impact of changes in the unemployment rate?
Use the AD/AS model to show the effects on GDP and the price level, in both the short run and long run, of:
a) An increase in the capital stock
b) A fall in interest rate
c) An improvement in the terms of trade
d) An increase in government spending finance entirely by an increase of taxes.