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Consider the Canadian economy that is in long run equilibrium with output equal to Y*. The...

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Economics

Consider the Canadian economy that is in long run equilibriumwith output equal to Y*. The United States economy goes into amajor slowdown causing a significant decrease in goods and servicesshipped into the United States from Canada. For the Canada, answerthe following questions:
A) What kind of shock occurred- aggregate demand or aggregatesupply? Explain your answer.
B) Explain the how fiscal policies by government of Canada canbe used to drive the economy back towards Y* in the long run.Explain the steps

Answer & Explanation Solved by verified expert
3.6 Ratings (455 Votes)
Initially the economy is at its long run equilibrium whereaggregate demand short run supply SRAS curve long run supplyLRAS curve and output level is Y Economy is at its economicequilibrium of point Ba As US is    See Answer
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