Full-employment equilibrium

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Reference no: EM137171

In October 2008, Canadian consumer self-confidence plunged to levels that last seen in the 1982 recession. As per some economic analysts, the global credit crunch and major stock market declines emerge to have had an effect on Canadian consumer confidence.

a. clarify the variety of factors that weigh down consumer confidence in 2008.

b. clarify also draw a graph to illustrate, how declining consumer confidence can modify real GDP and the price level in the short run.

c. If the economy was working at full-employment equilibrium, illustrate the state of equilibrium after the fall in consumer confidence? In what mode might consumer expectations have a self-fulfilling prophecy?

d. Why do changes in customer spending play such a large role in the business cycle?

e. Explain how the economy can regulate in the long run to reinstate full-employment equilibrium. Draw a graph to exemplify this adjustment process.

Reference no: EM137171

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