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Effects on the output-inflation and unemployment

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Consider the following quotes. "investment in the resources sector of the Australian economy decreased considerably as a percentage of GDP, from the very high levels achieved in previous years".

For your own working, illustrate the above decrease in the investment in the aggregate supply and aggregate demand diagram for the Australian economy. You do not need to submit the diagram to answer the questions below. For simplicity, assume that the real GDP was at its potential level before the decrease, and that there is no other shock. Focus on short-run effects.

a. In your AD-AS diagram, which curve(s) shifts, and which directions is the shift? Explain the shift(s)

b. State the short run effects on the output, inflation and unemployment.

Reference no: EM132669215

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