Download ECON 100: Principles of Economics

ECON 100: Principles of Economics
Assignment II
Total Mark: 40
Due Date: February 27, 2013
1. What happens to the market-clearing price and quantity when demand increases? When
demand decreases? When supply increases? When supply decreases? (please answer each of
the questions with graphical illustration)
2. In response to the business boom in Alberta, the city of Edmonton offered $200 per month rent
subsidies to low-income families so they could afford to live and work in the city. What impact
would this effect increase in income have on rents? What do you think was the intention of the
subsidies?
3. In your own words, list the key arguments for each side of the hands-off versus hands-on
debate.
4. In April 2009, the Bank of Canada reduced interest rates to their lowest possible levels. The Bank
of Canada believes this is the appropriate policy to move the economy back to full production
capacity and to achieve price stability
a. What key measures would you look at to determine if the performance of the economy
improves?
b. In October 2009, the Bank of Canada projected that Canadian GDP will decline by 2.4
percent in 2009 and grow by 3.0 percent in 2010 and by 3.3 percent in 2011. After
declines in 2009, inflation is expected to gradually return to 2 percent by the third
quarter of 2011. Explain why living standards are expected to be better in 2011 than in
2009.