Economics 248 Assignment 2 (version B)
This assignment has a maximum total of 100 marks and is worth 10 percent of your total grade for this course. You should complete it after completing your course work for Units 4, 5, and 6. Answer each question clearly and concisely.
a. Explain the various factors that buoyed the Canadian consumer confidence in 2012.
b. Explain and draw a graph to illustrate how a rise in consumer confidence can change real GDP and the price level in the short run.
c. If the economy was operating at full- employment equilibrium, describe the state of equilibrium after the increase in consumer confidence. In what way might consumer expectations have a self-fulfilling prophecy?
d. Why do changes in consumer spending play such a large role in the business cycle?
e. Explain how the economy can adjust in the long run to restore full-employment equilibrium. Draw a graph to illustrate this adjustment process.
b. Describe the two key tools of monetary policy, and describe how they would be used by the Bank of Canada to implement a contractionary monetary policy. (5 marks)
a. describe the discretionary and automatic fiscal policy actions that might occur.
b. describe a discretionary fiscal stimulation package that could be used that would not bring a budget deficit.
c. describe the risks of discretionary fiscal policy in this situation.
d. explain the argument that lower corporate tax rates can increase tax revenue in Kenya. Consider the Laffer curve in your explanation.
propensity to save (MPS) in determining the size of the multiplier.
b. Explain how the size of the multiplier will change when one brings in the role of the marginal tax rate. (2 marks)
c. Using the concepts in parts (a) and (b) above, calculate the slope of the AE curve and the size of the multiplier if MPS = 0.35. Then, calculate the revised slope of the AE curve and the multiplier when you know that the imports and the marginal tax rate will reduce the slope of the AE curve by another 0.20.
a. Given the above, what would you predict about the overall direction of the economy? Explain your answer by referring to each of the indicators cited.
b. Describe the fiscal policy that will already be automatically operating, as well as the appropriate discretionary fiscal policy that the government should adopt, given the above situation. (3 marks)
c. Describe the appropriate monetary policy that the Bank of Canada should be operating, given the above situation. (2 marks)
a. What is the opportunity cost of 1 unit of wheat in Canada? Show your work.
b. What is the opportunity cost of 1 unit of steel in Brazil? Show your work.
c. Which country has a comparative advantage in producing steel? Explain why.
d. Suppose that trade takes place between Canada and Brazil. Which good will Brazil import from Canada? Explain why.
from such practice. (5 marks)
b. Why are developing countries in Africa especially affected by export subsidies in industrial countries? (5 marks)
a. Canadian importers of goods from the US
b. Canadian firms that sell commodities to US buyers
c. American tourists who come to Canada
d. US investors who had purchased Canadian securities prior to this currency appreciation
a. What evidence does GI present to support the view that Canada had entered a recovery?
b. Use a short-run Phillips curve to explain why the inflation rate may increase over the course of 2012.
c. Under what circumstances might the inflation rate not increase during 2012?
And one more question:
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