B2. Using the Aggregate Expenditure (AE) model to explain the effect of slowdown in Chinese economic...

B2. Using the Aggregate Expenditure (AE) model to explain the effect of slowdown in Chinese economic growth rates on Australian equilibrium output and employment.
B3. Use the foreign exchange model to explain the impact of an increase in US interest rates

on the Australian dollar?
B4. Use the per worker production function to explain why additional capital per worker

cannot be a source of long run economic growth in an economy

Expert Solution

Note: These three questions are totally different from each other. They are not the sub-part of each other. So, i can solve only one of them. So, i solving first question (i.e B2).

(B2.)

The effect of slowdown in Chinese economic growth rates on Australian equilibrium output and employment.

As shown in above diagram, slowdown in Chinese economic growth rates cause reduction in exports from Australia to china, from X₁ to X₂. Because, Australia is major exporter of goods and service to china. Australian exports to china accounts nearly one third (1/3) of total exports of Australia. so, its very clear that, slowdown in Chinese economic growth rates negatively affect Australia exports to china.

The equilibrium point shift from E₁ to E₂. At new equilibrium point (E₂ ) output and employment decline from Y₁ to Y₂.

Rahul Sunny answered 1 year ago

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