After you have studied Economics in the News on
pp. 640 – 641 , answer the following questions.
a. What are the main features of the Canadian
economy in the second quarter of 2014?
b. Did Canada have a recessionary gap or an
inflationary gap in 2014? How do you know?
c. Use the AS - AD model to show the changes in
aggregate demand and aggregate supply that
occurred in 2013 and 2014 that brought the
economy to its situation in mid-2014.
d. Use the AS - AD model to show the changes in
aggregate demand and aggregate supply that
will have occurred when full employment is
restored.
e. Use the AS - AD model to show the changes in
aggregate demand and aggregate supply that
would occur if the government increased its
expenditure on goods and services or cut taxes
by enough to restore full employment.
f. Use the AS - AD model to show the changes in
aggregate demand and aggregate supply that
would occur if the economy moved into an
inflationary gap. Show the short-run and the
long-run effects.