Microeconomic

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1. Indicate whether each of the following statements applies to microeconomics or macroeconomics, and why: 12 Marks Total

a. The unemployment rate in Canada was 7.0 percent in January 2010

Answer: This is the macroeconomic statement because it describes the unemployment rate of the whole country.

b. A Canadian software firm discharged 15 workers last month and transferred the work to India.

Answer: This is the microeconomic statement because it focuses in an individual Canadian software firm of how they make decision in transferring their 15 workers to other workplace in India.

c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise.

Answer: This is the microeconomic statement because it talks about specific incident that happened in Florida which causes the raise in price of one specific product which is the oranges.

d. Canadian economic output i.e. GDP (Gross Domestic Product) adjusted for inflation grew by 3.0 percent in 2010.

Answer: This is the macroeconomic statement because it describes the GDP of how much goods produced effects the inflation of the whole country in Canada.

e. Last week the Scotia Bank lowered its interest rate on business loans by one-half of 1 percentage point.

Answer: This is the microeconomic statement because it gives the information of the individual firm - Scotia Bank and what they did last week with the interest rate on business loan.

f. The Canadian consumer price index an indicator of national inflation rose by 2.2% in 2011.

Answer: This is the macroeconomic statement because it describes the rate of growth of the whole national inflation in 2011.

2. The Consumers Budget Lines: See pages 8 and 9. Suppose you won $15 on a Lotto Canada ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. The price of candy bars is $0.75 and the price of peanuts is $1.50. 20 Marks Total

a. 6 combinations of candies and peanuts I may purchase (4 Marks) |Goods |A |B |C |D |E |F | |Candy bars “Y” axis |0 |6 |10 |14 |18 |20 | |Bags of peanuts “X” Axis |10 |7 |5 |3 |1 |0 |

b. Using the 6 points above, plot a graph with “Y” axis and “X” axis, and clearly label each point on the graph as per your table. Show it as a budget line on a graph. 4 Marks | | | | | | | | | | | |A |B |C |D |E | | | | | | | | |Automobiles –Y axis |0 |2 |4 |6 |8 | |Forklifts - X axis |30 |27 |21 |12 |0 | | | | | | | |

a. What does a production possibility curve represent? 2 Marks Answer: A production possibility curve represents the different combinations of goods and services that a country can produce in a fully employed economy with a fixed availability of supplies of resources and technology. In this case, the production possibilities curve represents the different combinations of consumer goods - automobiles and capital goods – forklifts in the country Exania.

b. Plot the data graphically (clearly label each axis and each point, showing which combinations are “Attainable” and which...
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