Q2. Describe who gets hurt in a rece... [FREE SOLUTION] (2023)

In 2008, problems in the financial sector led to a drying up of credit around the country: home-buyers were unable to get mortgages, students were unable to get student loans, car-buyers were unable to get car loans, and so on.

1. Explain how the drying up of credit can lead to compounding effects throughout the economy and result in an economic slump.
2. If you believe the economy is self-regulating, what would you advocate that policymakers do?
3. If you believe in Keynesian economics, what would you advocate that policymakers do?

Which of the following reflect comparative advantage, and which reflect macroeconomic forces?

1. Thanks to the development of huge oil sands in the province of Alberta, Canada has become a BUSINESS CASE exporter of oil and an importer of manufactured goods.
2. Like many consumer goods, the Apple iPad is assembled in China, although many of the components are made in other countries.
3. Since 2002, Germany has been running huge trade surpluses, exporting much more than it imports.
4. The United States, which had roughly balanced trade in the early 1990s, began running large trade deficits later in the decade, as the technology boom took off.

Which of these sound like inflation, which sound like deflation, and which are ambiguous?

1. Gasoline prices are up 10%, food prices are down 20%, and the prices of most services are up 1– 2%.
2. Gas prices have doubled, food prices are up 50%, and most services seem to be up 5% or 10%.
3. Gas prices haven’t changed, food prices are way down, and services have gotten cheaper, too.

Argentina used to be as rich as Canada; now it’s much poorer. Does this mean that Argentina is poorer than it was in the past? Explain.

Many poor countries have high rates of population growth. What does this imply about the long-run growth rates of overall output that they must achieve in order to generate a higher standard of living per person?