Question

Refer to article 2. one of the critics from rose (2022) stated, "in a world where the economy is at full potential, we’ve got inflation running potentially to 7%, it doesn’t seem like a smart move to put more money into the pockets of consumers… that runs counter to what the reserve bank is trying to do." this statement implies that the australian economy is [ select ] . by introducing the dine and discover scheme, inflation would [ select ] and cause the economy to operate [ select ] with [ select ] unemployment. this is contrary to what the reserve bank is trying to achieve, which is [ select ] inflation through [ select ] interest rates.

Answer 1

The Australian economy's high inflation rate suggests it’s at full capacity. Stimulus measures like the Dine and Discover scheme would likely increase inflation, countering the Reserve Bank's goal of controlling inflation through interest rate adjustments.

Step-by-step explanation:

The critic's statement from Rose (2022) suggests that the Australian economy is currently experiencing high inflation rates, possibly around 7%, indicating an economy that is potentially at full capacity. Introducing a stimulus like the Dine and Discover scheme would infuse additional money into the consumer market, which, in an economy already at its potential, could lead to increased inflation.

This would be counterproductive to the Reserve Bank's efforts, which typically involve curbing inflation to maintain economic stability. In these circumstances, the Reserve Bank might aim to control inflation by manipulating interest rates, often increasing them to reduce consumer spending and slow down economic growth. This action helps to maintain a balance in the economy and prevents it from overheating, which could otherwise lead to unsustainably high inflation and possibly hurt the standard of living if wages don't keep up with the rising prices.