Q 10

Consider a macro-economy that was initially at equilibrium.Using an aggregate demand and aggregate supply diagram model of the economy, graphically illustrate and discuss the short-run and long-run effects of the following events upon the economy:

(a) The imposition of a carbon tax upon local big polluting companies;

(b) An appreciation in the foreign exchange rate value of the economy's currency;

(c) A major trading partner's economy fall into recession;

(d) The country's main exports fall in price while the goods the country imports from abroad rise in price