Reference no: EM133336768

Questions: 1. The government's budget surplus in Finland has risen consistently over the past seven years. To amateur economist disagree as to why this is happened. One argues that a rising budget surplus indicates a growing economy. The other argues that it shows that the government is using contractionary fiscal policy. Can you determine which argument is correct? If not, why not?

2. Chocolate is the most popular flavor of ice cream in America. For each of the following, indicate the possible effects on demand, supply, or both as well as equilibrium price and quantity of chocolate ice cream.

a. A severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate ice cream.

b. A new report by the American Medical Association reveals that chocolate does, in fact, have significant health benefits.

c. The discovery of cheaper synthetic vanilla flavoring lowers the price of vanilla ice cream.

d. New technology for mixing and freezing ice cream lowers manufacturers' costs of producing chocolate ice cream.

3. Suppose that you live in a city whose economic growth has been declining for several months. Oddly, the official unemployment rate in your city has not begun to rise. How can you explain this?