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1) Consider the following quotation:
The consumption aspects of the [first] stimulus package were also designed to be
quick acting, with significant cash bonuses paid to pensioners, carers and seniors,
and low-income households within weeks of the announcement.
These are household groups that tend to have relatively high propensities to consume
out of income . . . thus maximising the economy-wide stimulus effects of the package.
Australia's response to the global financial crisis
A speech to the Australia Israel Leadership Forum
Wednesday 24 June 2009
Dr Steven Kennedy
Australian Treasury
(http://www.treasury.gov.au/docum ... _Steven_Kennedy.htm)
Will this strategy maximise “the economy-wide stimulus effects of the package”.
Why?
2) The Australian government, as part of its economic stimulus package in response to
the Global Financial Crisis, introduced a payment up to $900 for eligible taxpayers.
Using the 45-degree diagram, explain the likely short-run effects of this policy on
equilibrium real GDP (for the purposes of this question, you may assume that the
payment was the same regardless of the tax-payer’s income).
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