ECON 356 ASSIGNMENT 1 DUE: By Tuesday noon July 16, 2024 on Canvas Consider a large recessionary shock that hits the US and Canada today but is only sustained in Canada. The US is assumed to be 50% of the world economy, and Canada is a small country. The changes are: US: Y1, Y2 constant Canada: Y1, ½ Y2 a. Using different colour pens and showing the direction of shifts, provide a complete and exact set of 3-sector graphs for both the US economy and the world economy. Start by identifying the US autarkic changes as a reference. b. Fill in the changes of the relevant variables in the table (+0) for US and the world, the important question being whether the US runs a current account deficit or surplus, borrows or lends abroad, and gains/loses H. US Canada WORLD Y (Y-Cd) (Bd-Bs) r HP c. Show in a separate set of graphs the autarkic changes for Canada, and then insert the changed interest rate from the world market to complete the problem. Show the signs for Canada's reaction in the above table. d. It might be reasonable to think that Canada's current account should move in the same direction as that of the US. Does it? Explain why or why not. e. Can you guess which way the rest of the world (the other 50%) would be moving if it had no shocks at all? Explain.
ECON 356 ASSIGNMENT 1 DUE: By Tuesday noon July 16, 2024 on Canvas Consider a large recessionary shock that hits the US and Canada today but is only sustained in Canada. The US is assumed to be 50% of the world economy, and Canada is a small country. The changes are: US: Y1, Y2 constant Canada: Y1, ½ Y2 a. Using different colour pens and showing the direction of shifts, provide a complete and exact set of 3-sector graphs for both the US economy and the world economy. Start by identifying the US autarkic changes as a reference. b. Fill in the changes of the relevant variables in the table (+0) for US and the world, the important question being whether the US runs a current account deficit or surplus, borrows or lends abroad, and gains/loses H. US Canada WORLD Y (Y-Cd) (Bd-Bs) r HP c. Show in a separate set of graphs the autarkic changes for Canada, and then insert the changed interest rate from the world market to complete the problem. Show the signs for Canada's reaction in the above table. d. It might be reasonable to think that Canada's current account should move in the same direction as that of the US. Does it? Explain why or why not. e. Can you guess which way the rest of the world (the other 50%) would be moving if it had no shocks at all? Explain.
Chapter1: Making Economics Decisions
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Transcribed Image Text:ECON 356 ASSIGNMENT 1
DUE: By Tuesday noon July 16, 2024 on Canvas
Consider a large recessionary shock that hits the US and Canada today but is only sustained in
Canada. The US is assumed to be 50% of the world economy, and Canada is a small country.
The changes are:
US: Y1, Y2 constant
Canada: Y1, ½ Y2
a. Using different colour pens and showing the direction of shifts, provide a complete and exact
set of 3-sector graphs for both the US economy and the world economy. Start by identifying the
US autarkic changes as a reference.
b. Fill in the changes of the relevant variables in the table (+0) for US and the world, the
important question being whether the US runs a current account deficit or surplus, borrows or
lends abroad, and gains/loses H.
US
Canada
WORLD
Y
(Y-Cd)
(Bd-Bs) r HP
c. Show in a separate set of graphs the autarkic changes for Canada, and then insert the changed
interest rate from the world market to complete the problem. Show the signs for Canada's
reaction in the above table.
d. It might be reasonable to think that Canada's current account should move in the same
direction as that of the US. Does it? Explain why or why not.
e. Can you guess which way the rest of the world (the other 50%) would be moving if it had no
shocks at all? Explain.
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