Question

1. If there is a tax cut at the same time that major new sources of oil are discovered in the country, what would we expect will happen in the short run? Explain your answer.

2. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen in the short run? Explain your answer.

3. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, what would we expect to happen in the short run? Explain your answer.

4. Why is the long-run aggregate-supply curve vertical?

5. Why is it desirable for a country to have a large GDP? Give an example of something that would raise GDP and yet be undesirable.

6. What components of GDP (if any) would each of the following transactions affect? Explain.

a. A family buys a new refrigerator.

b. Aunt Jane buys a new house.

c. Ford sells a Thunderbird from its inventory .

d. You buy a pizza.

e. Quebec repaves Highway 50.

f. Your parents buy a bottle of French wine.

g. Honda expands its factory in Alliston, Ontario.

Answer 1