Impact of shocks on output and employment

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1. An increase in the price of coffee will lead to an increase in the price of tea. (Diagram Required)

2. In an economy subject to aggregate demand shocks, a fixed exchange rate amplifies these shocks and increases the impact of these shocks on output and employment. (Diagram Required)

3. Policy makers are able to increase output beyond its potential level in the long run by increasing inflation. (Diagram Required)

4. An increase in interest rates (the yield on bonds) is equivalent to a decrease in bond prices. (Formula Required)

5. In order for a government to reduce its debt/GDP ratio they must run a primary surplus. (Formula Required)

6. An appreciation of the Canadian Dollar due to the booming oil industry in Alberta will lead to an increase in frictional unemployment as manufacturing jobs in Ontario are destroyed. (Definitions Required)

Reference no: EM132417173

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