Question

Find and explain questions 1-3

Using an AD/AS model, describe what happens to the price level and output in Canada in the short run as a major hurricane destroys important Canadian production plants. Assume that the economy starts in a long-and short-run macroeconomic equilibrium. a) Price and output increase. b) Price and output decrease. c) Price increases and output decreases. d) Price decreases and output increases. Using an AD/AS model, describe what happens to the price level and output in Canada in the short run as a major computer chip company produces a much faster and cheaper chip. Assume that the economy starts in long- and short-run equilibrium. a) Price and output increase. b) Price and output decrease. c) Price increases and output decreases. d) Price decreases and output increases. You are asked to compare Canada's' GDP per capita (= $35,000) to Chili's GDP per capital which converted to Canadian dollars is $30,000 CDN. In addition, you are told that the cost of living in Chili is 20% lower than in Canada. Which of the following answers provides a better comparison of the standard of living between the two countries? Canada's GDP/capita a) is the same as Chili's. b) exceeds Chili's GDP/capita by $5,000 CDN. c) exceeds Chili's GDP/capita by $2,500 CDN. d) is less than Chili's GDP/capita by $2,500 CDN.

Answer 1

Question 1

It has been stated that a major hurricane has destroyed important Canadian production plants.

This destruction of Canadian production plant will decrease the production capacity of Canada and thus production of goods and services in Canada will decrease.

This decrease in production of goods and services will result in a decrease in the aggregate supply in the short run and the short run aggregate supply curve will shift to the left.

Given the aggregate demand curve, this leftward shift of the short-run aggregate supply curve will result in an increase in price and decrease in output.

So,

The price will increase and output will decrease.

Hence, the correct answer is the option (C).