Question 4

Assume that Canada is initially in long run equilibrium with price level of P1 and GDP of Y1. Discuss how each of the following four events would affect aggregate demand, the price level and real GDP of Canada (mentioning how net exports are impacted), using graphs as required

a.There is a sharp rise in Canada's exchange rate

b.A wave of pro-Canadian sentiment sweeps the U.S. and people in U.S. increase their consumption of Canadian goods

c.There is a boom in China, which is a large importer of Canadian agricultural goods

d.Due to a global health concern, there is a travel restriction of foreign travellers coming to Canada