“c02DomesticMacroeconomicGoals_PrintPDF” — 2022/7/23 — 6:51 — page 152 — #52
2.8 Activities Students, these questions are even better in jacPLUS Receive immediate feedback and access sample responses
Access additional questions
Track your results and progress
2.8 Quick quiz
O
2.8 Exercise
FS
Find all this and MORE in jacPLUS
PR O
2.8 Exercise
U
N
CO RR EC
TE
D
PA
G
E
1. Describe the AD–AS diagram and explain what it shows. (2 marks) 2. Define the following terms related to the AD–AS diagram: (5 x 1 mark) a. Aggregate demand b. Aggregate supply c. Equilibrium level of economic activity d. An increase and decrease in aggregate demand e. An increase and decrease in aggregate supply 3. Explain the shape of the AS line. (2 marks) 4. a. Draw and label an AD–AS diagram where the economy is experiencing domestic economic stability. (1 mark) b. Draw and label an AD–AS diagram where the economy is experiencing an inflationary boom. (1 mark) c. Draw and label an AD–AS diagram where the economy is experiencing a severe recession. (1 mark) d. Draw and label an AD–AS diagram where the Australian economy is originally experiencing domestic economic stability. Next, on this same diagram, show and label the effects of a serious recession overseas in China and the United States, and a drop in our terms of trade. (2 marks) e. Draw and label an AD–AS diagram where the Australian economy is originally experiencing domestic economic stability. Next, on this same diagram, show and label the effects of a rise in Australia’s level of business confidence from a net balance of 5 to 25 points. (2 marks) f. Explain the situation called stagflation. Illustrate the onset of this situation on an AD–AS diagram. (2 marks) g. Explain why it is important for AD to rise at a rate that is matched equally by the rise in AS. (2 marks) 5. Download a copy of figure 2.26 from the Resources tab. Complete and fully label each of the AD–AS diagrams representing the Australian economy in figure 2.26 to show the hypothetical effects of an event that alters the macroeconomic conditions of either aggregate demand or aggregate supply, and hence the economy’s equilibrium level of prices and GDP. In most cases, you will need to add a second AD line (AD2 ) and/or a second AS line (AS2 ), along with a new equilibrium price (P2 ) and real GDP (GDP2 ). (9 marks)
152
Key Concepts VCE Economics 2 Units 3 & 4 Eleventh Edition
