Assume that Canada is initially in long run equilibrium with price level of P1 and GDP of Y1. Discuss how each of the following four events would affect aggregate demand, the price level and real GDP of Canada, use a graph to explain. There is a sharp fall in Canada’s exchange rateA wave of pro-Canadian sentiment sweeps the U.S. and people in U.S. increase their consumption of Canadian goodsThere is a recession in China, which is a large importer of Canadian agricultural goodsDue to a global health concern, there is a travel restriction of foreign travellers coming to Canada

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that Canada is initially in long run equilibrium with price level of P1 and GDP of Y1. Discuss how each of the following four events would affect aggregate demand, the price level and real GDP of Canada, use a graph to explain.

There is a sharp fall in Canada’s exchange rate
A wave of pro-Canadian sentiment sweeps the U.S. and people in U.S. increase their consumption of Canadian goods
There is a recession in China, which is a large importer of Canadian agricultural goods
Due to a global health concern, there is a travel restriction of foreign travellers coming to Canada

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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