demand, price level & GDP HELP (1 Viewer)

[channie]

im stuck, what effect does an increase in resource prices (that will affect most sectors of the aus economy) have on aggregate demand, the price level and GDP in Aus?

 

[AGB]

*leads to a rise in speculative investment, which is unproductive, and detracts from capital investment
*reduces consumption (basic demand and supply) through cost push inflation
*reduces exports as they are now more expensive on the international market, and also increases imports as they will be relatively cheaper

basically it effects C, I, X and M

 

[channie]

thanks for your help! it more understandable now
so if i was drawing a graph for it, I would aggregate demand making a leftward shift on the graph to demonstrate it?

 

[Bambul]

If you mean an increase in the global price level of resources/commodities, then that has a very different effect to an increase in the costs of production in Australia.

AGB gave a good answer to the latter. The former has vastly different effects.

 

[channie]

okay, so what would happen if it was just resource prices that increased in australia?

 

[AGB]

what i said above