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1)Explain why the long-run aggregate supply (LRAS) curve is vertical while the short-run aggregate supply (SRAS) curve slope upwards

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1)Explain why the long-run aggregate supply (LRAS) curve is vertical while the short-run aggregate supply (SRAS) curve slope upwards. List and discuss briefly the variables that could cause the LRAS and the SRAS curves to shift. For each variable, identify whether an increase in that variable will cause the curves (LRAS and SRAS curves) to shift to the right or to the left.

2)What are the main roles of the Reserve Bank of Australia (RBA)? How does the RBA control liquidity in the overnight money market? Explain briefly why an open market purchase of government securities by the RBA increase bank reserves while an open market sale of government securities by the RBA decrease bank reserves.

3. What is inflation targeting? How does inflation targeting help to achieve the main goals of monetary policy?