Refer to Table 12.1 for the following question.
Table 12.1

-Refer to Table 12.1. Consider the hypothetical information in the table for potential GDP, real GDP and the price level in 2016 and in 2017 if the Reserve Bank of Australia does not use monetary policy. If the Reserve Bank of Australia wants to keep real GDP at its potential level in 2017, it should:

Question

Refer to Table 12.1 for the following question.
Table 12.1
 
-Refer to Table 12.1. Consider the hypothetical information in the table for potential GDP, real GDP and the price level in 2016 and in 2017 if the Reserve Bank of Australia does not use monetary policy. If the Reserve Bank of Australia wants to keep real GDP at its potential level in 2017, it should:

Quizplus · Accepted Answer

Based on the information in the table, real GDP is below potential GDP in both 2016 and 2017, indicating that there is a recessionary gap. To close this gap and bring real GDP back to its potential level, the Reserve Bank of Australia should use expansionary monetary policy. This can be achieved by buying government securities from the market, which will increase the money supply and lower interest rates. Lower interest rates will encourage borrowing and spending, which in turn will increase aggregate demand and lead to an increase in real GDP.

Refer to Table 12.1 for the Following Question