Using the S/D Model, show the change in the following statement that will lead to a change in Supply curve or Demand curve, and then the change in equilibrium price (Pe) and equilibrium quantity (Qe) to the Australian new car and 2nd hand car market.

Question 1

a(i) State the production levels for this economy at Point C.

a(ii) What is the total opportunity cost of avocados when moving from point B to D? 

a(iii) What is the unit opportunity cost of each avocado when moving from B to D? 

a(iv) Which point(s) illustrated on the above PPF are unattainable? 

a(v) Which point(s) illustrated on the above PPF are inefficient?

(b) Assume that the locally made medical equipment firm involves extremely high set up costs and has to spend a huge amount on research and development. More importantly, the company has to fulfil many stringent requirements from the government. Given the unique products, almost every local hospital uses this company in the country.

(c) Assume that Firm A’s production and cost schedule are as follows:

Question 2 

2) Using the S/D Model, show the change in the following statement that will lead to a change in Supply curve or Demand curve, and then the change in equilibrium price (Pe) and equilibrium quantity (Qe) to the Australian new car and 2nd hand car market.

a) How will the lock down affect the new car market in Country A? 

b) How will the above (Q2a) affect the 2nd-hand car market in Country A?

c) May wants to open a Cafe. It will cost her $300,000 per year to rent the cafe, hire staff and cover all other expenses. The Cafe will bring in $350,000 worth of Revenue. By starting the Café, May has to give up her teaching job from which she earns $80,000.

2c i) Calculate May’s accounting profit.

2c ii) Calculate May’s economic profit / loss. 

2c iii) From the economic point of view, is May’s business profitable? 

Question 3

a) What is the desirable level of GDP growth, inflation rate and unemployment rate for Australia? Furthermore, what is the actual level of the current GDP growth, inflation rate and unemployment rate according to the latest government’s release. Fill in the blanks.

b) What is the key economic problem Australia is currently facing and how does/did RBA response to it (i.e. what type of macroeconomic policy?). How does this policy affect the Aggregate Demand (AD) components and affect the AD, SAS and/or LAS curve in the AD/AS Model? 

c) How does each of the following transactions affect the Current Account balance or the Capital and Financial Account balance and the Australian Dollar (AUD).

(i) Australian imports more cars from Germany.

(ii) Australian exports more wheats to China. 

(iii) An US farmer purchases an Australian farm. 

(iv) An Australian company purchases a gold mine in Brazil.  

(v) Australia donates $8 million to Cambodia due to the recent disaster. 

Question 4

a) Calculate the GDP for the year 2025 and 2026. 

b) Calculate the government budget for the year 2025 and 2026. 

c) What are the key economic problems Country G faces in 2026? List and report on the Key Macroeconomic variables performance. If so, what type of discretionary fiscal policy would Country G undertake?

d) How does fiscal policy affect the components of aggregate demand? Refer to Q3 c): How could the policy affect the AD or SAS or LAS curve in the AD/AS Model.