Design an anti- recession stabilisation policy, involving both fiscal and monetary policies
which is consistent with:
(a) A relative decline in the public sector. (3 marks)
(b) Greater income equality (4 marks)
(c) A high rate of economic growth. (3 marks)
Trace through with the assistance of diagrams, the effect of a fall in the money supply on
investment demand and aggregate demand. (3 marks)
What will happen to real GDP, unemployment and inflation? (3 marks)
What factor(s) will determine the effectiveness of this policy? (4 marks)
Indicate whether each of the following creates a demand for, or supply of Euros in foreign
(a) An Australian importer purchases a shipload of French wine.
(b) A German motor vehicle manufacturer decides to build an assembly plant in Adelaide.
(c) An Australian university student decides to spend a year studying at an Irish
(d) A French manufacturer exports machinery to Morocco on an Australian ship.
(e) An Australian government bond held by a Dutch citizen matures.
(2 marks each –a total of 10 marks
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