QUESTION
What does Say’s Law imply for the operation of a free-market economy?
Illustrate with a Keynesian 45-degree line diagram a level of economic activity
that does not align with such an assertion. What might the Reserve Bank of
Australia (RBA) do in response to such a situation? Explain, with the aid of
appropriate diagrams, the impact of the RBA’s actions on the level of GDP. Also
discuss the expected impact on unemployment and inflation.