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ECON1000 S2 2021 MRA Further Assessment Overview (worth 10 marks): Q1 - Modules L3 and L4

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ECON1000 S2 2021 MRA Further Assessment Overview (worth 10 marks):

Q1 - Modules L3 and L4. Aggregate Demand and Fiscal Policy in Recessionary Times

Australia was in recession during the first half of 2020 as the pandemic led to a substantial reduction in production and household spending, according to this article: https://www.theguardian.com/business/grogonomics/2020/sep/02/australians-needs-government-support-to-get-out-of-this-recession-winding-it-back-is-not-an-option

In response, fiscal policy in Australia has played an important counter-cyclical role, as pointed out in these articles:

https://www.theguardian.com/australia-news/2020/jul/21/jobseeker-payment-economists-on-why-its-dangerous-to-cut-covid-19-welfare-subsidy

https://www.abc.net.au/news/2020-10-06/why-people-spend-save-stimulus-tax-cut-coronavirus-budget/12698520

1. Use the multiplier model to illustrate and explain in some detail how the aggregate demand function shifted from 2019 to mid-2020 due to the pandemic-led “household recession”.

     [6 marks]

2. On the same diagram in Part A, illustrate and explain how fiscal stimulus measures helped to mitigate the macroeconomic shock from the coronavirus in mid-2020 to 2021.

     [4 marks]

                    [suggested word limit: 400] [10 marks]