Refer to Table 16.1 for the following question.
Table 16.1

-Refer to Table 16.1.Consider the hypothetical information in the table for potential GDP,real GDP and the price level in 2012 and in 2013 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 2013,it should

Question

Refer to Table 16.1 for the following question.
Table 16.1
 
-Refer to Table 16.1.Consider the hypothetical information in the table for potential GDP,real GDP and the price level in 2012 and in 2013 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 2013,it should

Quizplus · Accepted Answer

According to the table, in 2013, real GDP is below potential GDP, indicating a recessionary gap. If the Reserve Bank of Australia wants to close this gap and bring the economy to its potential level, it should use expansionary monetary policy. Buying government securities would increase the money supply, lower interest rates, and stimulate investment and consumption, which can lead to an increase in aggregate demand and ultimately close the recessionary gap. Selling government securities, increasing interest rates, or increasing income taxes would have the opposite effect and would not be appropriate measures to close the gap.

Refer to Table 16.1 for the Following Question