Question

Suppose Canada, a trading partner of the United States, a recession. Using a well labeled diagram...

Suppose Canada, a trading partner of the United States, a recession. Using a well labeled diagram of AD-AS model, show and explain how this affects the US economy in the short-run as follows. (10 pts)

a. Draw a diagram to depict the event described above on the US economy, based on the AD-AS model. (2 pts)

b. Based on your diagram in (a), carefully explain how the event will impact real GDP the US (5pts)

c. Carefully explain what will happen to unemployment in the short-run. (3 pts)

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Canada, a trading partner of US is facing a recession.

a) As Canada is facing a recession, Canadian consumers will demand less of US products which means US will export less to Canada.

Aggregate demand = Consumption + Investment + Government spending + Exports - Imports

Fall in exports will reduce aggregate demand of US which shift demand curve of US to its left from AD to AD1 while supply remains the same.

b) It will reduce real GDP of US from Y to Y1 as depicted in the diagram above.

c) Unemployment in US is likely to rise in short run because producers there will need less of the labor to produce goods.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
3.Canada is a small open economy, and our (by far) largest trading partner is the United...
3.Canada is a small open economy, and our (by far) largest trading partner is the United States. Imagine that the US economy enters a significant recession due to COVID-19, but the Canadians do not get sick at all and everything works as usual in the Canadian economy. How would the US recession show in the Canadian economy? Use the IS-LM-FE model to explain what would happen to the Canadian real GDP and real interest rate and why. Discuss the effects...
Canada is the largest trading partner of the U.S. Suppose the U.S. economy keeps growing. What...
Canada is the largest trading partner of the U.S. Suppose the U.S. economy keeps growing. What will happen to the AD curve for Canada?
Canada is the United States’s biggest trading partner. This question looks at the effects different events...
Canada is the United States’s biggest trading partner. This question looks at the effects different events on the exchange rate and U.S. net exports. For the following cases, describe the effects on net exports and the Cdn$/US$ exchange rate: (a) The Canadian economy goes into a recession but the American economy avoids a recession. (b) President Trump imposes a tariff on Canadian exports into the USA.
The United States’ major trading partner is Canada. Ceteris paribus, explain what will happen (and why...
The United States’ major trading partner is Canada. Ceteris paribus, explain what will happen (and why it will happen) to the value of the U.S. dollar if each of the following events occur: A. Canada reduces tariffs on goods imported from the U.S. B. The U.S. decreases its money supply. C. The U.S. reduces taxes and increases government spending. D. Canadian residents choose to buy goods produced in Canada instead of goods produced in the U.S.
Suppose that a decrease in the demand for goods and services pushes the economy into recession....
Suppose that a decrease in the demand for goods and services pushes the economy into recession. Assuming policymakers do nothing, what happens to the price level, output, and unemployment in the short run? What ensures that the economy still eventually gets back to the natural rate of output? What happens to price-level, output, and unemployment in the longrun? Use an appropriately labeled AD-SRAS-LRAS diagram to help explain your answer.
Suppose that the United States’ principal trading partners experience a sharp recession with falling GDP. How...
Suppose that the United States’ principal trading partners experience a sharp recession with falling GDP. How will the U.S. economy be affected? Can the United States insulate itself from this effect?
The economy initially starts in LRE. Canada enters a recession. Suppose the US government is influenced...
The economy initially starts in LRE. Canada enters a recession. Suppose the US government is influenced by Keyensian economic theory so it likes to actively manage business cycles. It decides to do fiscal policy. What could the US government could do which would be appropriate fiscal policy? ["Lower taxes and decrease government spending", "Raise taxes and decrease government spending", "Appreciate the currency", "Raise taxes and lower investment", "Lower taxes and increase government spending"]       Given that the US government...
As of January 1, 2020 (before the rapid spread of the Coronavirus) was the United States...
As of January 1, 2020 (before the rapid spread of the Coronavirus) was the United States economy operating in the Keynesian, intermediate, or neoclassical portion of the economy’s Short Run Aggregate Supply Curve? Explain your answer carefully using the data and information that you have gathered regarding real GDP, unemployment, the GDP deflator, and inflation in the previous discussions. You should discuss the concepts of potential GDP and the natural rate of unemployment to receive full credit.
The following events have occurred in the history of the United States: A deep recession hits...
The following events have occurred in the history of the United States: A deep recession hits the world economy. The world oil price rises sharply. U.S. businesses expect future profits to fall 1-)Explain for each event whether it changes short-run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them.
3. There is an increase in the wages in Canada, which causes an increase in cost...
3. There is an increase in the wages in Canada, which causes an increase in cost of production by firms in the country. a. Use the AS/AD model to demonstrate the short-run impact of this event on the aggregate demand (AD) curve, the short-run Aggregate Supply curve (AS), real GDP, price level and unemployment. Your answer should include:                             i. An AS/AD graph with all curves and quantities clearly labeled. For curves and quantities that change, label their old values...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT