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[MACRO ECONOMICS -
It briefly explains how changes take place in aggregate demand and aggregete supply
when there will be a change in dollar value of Canada, decrease in world oil price and
change in business plan.
The Canadian economy is in long-run equilibrium. Assume the following events occur one at a
time. Show the effect of each event on Aggregate Demand and Short-run Aggregate Supply in
Canada by shifting only one curve. Potential GDP does not change. Label the change in
equilibrium price P2 and output Y2 and equilibrium E2.
In your assignment use this graph format for each impact.
IMPACTS: (Draw new graph for each)
A. The value of the Can $ declines.
B. World oil prices decrease.
C. Canadian businesses plan to increase inventories.
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A) The value of Canadian dollar declines:
When the value of Canadian dollar declines relative to a foreign currency, Canadian goods and
services become relatively cheaper compared to foreign goods and s