1. Using demand and supply curves show the impact of the following:

Make sure you label your axis, your supply and demand curves, as well as the movement of price (P to P1) and quantity (Q to Q1).

a. The impact of a price decrease of rice on the market for potatoes:

Impact on price:

Impact on quantity:

b. The expectation of a price increase on the market for coffee:

Impact on price:

Impact on quantity:

c. The impact of a decrease in the price of memory chips on the market for computers:

Impact on price:

Impact on quantity:

d. The impact of an increase in excise taxes on refrigerators on the market for refrigerators:

Impact on price:

Impact on quantity:

e. The impact of the government imposing a price ceiling on apartment rents:

Impact on rental price:

Impact on quantity supplied:

Impact on quantity demanded:

f. If the demand for many farm products is inelastic, why would a bad crop, that is, fewer crops harvested, be to the advantage of farmers? Use demand and supply curves to illustrate your answer.

What would be the impact on farmers total revenue?______________________________________

2. Is the equilibrium level of GDP necessarily an ideal economic situation? (Use aggregate demand and aggregate supply curves to illustrate your answer.)

List three factors which might cause the aggregate demand curve to shift to the right:

3. The following is the Consumer Price Index for Canada for the years 2009 to 2011. (The CPI for 2002 = 100.0). Calculate the annual rate of inflation for 2009, 2010 and 2011. Your answer should be accurate to 2 decimal places.

4. Examine the following partial balance sheet for ABC Bank:

Assume the bank requires a 5% reserve ratio

a) What are the current excess reserves of the bank?_________________
b) If ABC Bank decides to lend out the excess reserves, what is the potential increase in the money supply?_____________
c) Assume $20,000 is withdrawn from the bank, what are the excess reserves of the bank now?__________________
d) If ABC Bank decides to lend out the excess reserves, what is now the potential increase in the money supply?_____________

5. What impact will an decrease in the money supply have on:

a. Interest rates_____________________
b. Business investment____________________
c. Aggregate demand__________________
d. Employment in Canada_________________
e. Prices___________________

6. Briefly answer the following questions using Microsoft Word:
 - Your answers will reflect the correct use of grammar, spelling, and vocabulary and terms associated with the subject matter.
 - Content will be relevant, accurate and concise.

a. The Canadian government spends money on military equipment. What is the opportunity cost of this spending?
b. Why are the services performed by volunteers not included in the calculation of GDP? Should the work of volunteers be recognized in the National Accounts?
c. Why is RGDP (Real Gross Domestic Product) a better indicator of the amount of goods and services produced than GDP?
d. In a recession, government should not undertake any additional expenditures. Comment on this statement.
e. Will increases in government spending be sufficient to provide everybody with a job? In your answer consider the major types of unemployment: demand-deficient, frictional, seasonal, and structural.