1. An increase in demand for lumber, wheat and paper means consumers are more attractive to exchange which will make Canadian companies to produce more. If the demand for all commodities increases than Canadian exchange rate will increases. The supply curve is upward-sloping. More demand, means more production means more employees and more equipment than foreign companies need more money to buy all these products so for equilibrium Canadian dollar must increase.
2. CH-3 A1
a. It will be recorded in investments.
b. This fall in inventories appear in a negative number, because the quantity decrease in inventory used for commercial and decrease in growth rate od residential construction.
3. CH-3 B1
a. It was smaller because the base year is100 which equals to 1992, so 1987 will be smaller because the economy will grow as time goes by and account inflation in 1992 as the base.
b. It would be the same because nominal GDP is valued at its current price and it also takes inflation.
4. CH-4 A9
a. yes, because the number of new jobs created and the number of people joining the force affects unemployment. It doesn’t matter part-time or full-time.
b. There is not full information that is enough to say anything about unemployment.
5. CH-4 B5
A. Unemployment insurance helps subsidize certain kinds of jobs in many ways. Some positions only offer seasonal employment during peak season.
A) The protection spending multiplier is ordinarily thought to be substantial.
b) It affects Canada because it is a different country. American imports will rise and Canadian exports increase. Canada will increase defense spending to higher U.S.
7. CH-5 A17
a. Canada will have more leverage in trade because of high demand of Canadian resources and it will also strengthen the Canadian economy. It all because of excess demand situation they will need to do react to the situation by doing quantity adjusting. They would need to hire more workers as well to keep up with the demand. This will definitely help to eliminate shrinking inventories or lost business.
b. If inventory doesn’t get sold, companies will be forced to sell off their inventory at reduced price, which could reduce their profit margin will affect the bottom line.
8. CH-5 A35
a. In the long run the government spending will be increased and in return it will take income at higher to private individuals, so they will spend trough the consumption and due to this budget deficit will help economy in better way. The demand will increase due to increase in spending. So, due to high demand and to keep demand at higher level company needs to hire more individuals to meet their demands. So, now individuals are employed and they are earning so than they will spend also which further keep the demand at higher level.
b. So, there is a high level of unemployment due to which tax revenues are less and expenditures are high and there is a negative impact of budget deficits, higher interest rate means less investment.
9. CH-6 A3.
a. As per Keynesian theory, the government should step in so that they can increase the spending, by increase money supply and buying bonds back.
b. The government can recover for the economy otherwise it will take long time to recover. As, there is less spending.
10. CH-7 A11
a. Encouraging could be risky as the more money consumed than they spend less and will save more which will be result in economic downfall. Consumers must keep the US economic recovery steady by spending money on goods and services. The saving money can go away by inflation as each year money is less and less
Increasing saving is good in the longer term because it allows an individual to have funds available to have funds available to them in times of