1. In May 2010, the Reed Job Index reported that demand for new workers was growing, but wage and salary on offer of new jobs was declining. Economists argued this was strong evidence that the economy had entered the recovery phase of the business cycle.
Interpret the above information using the AD/AS model. Which curve was shifting? Which way?
2. The Canadian economy suffered two shocks in 2008, leading to the recession in 2008-2009. One shock related to rising oil prices; the other was the slump in both consumer and business confidence.
[a] How would these two events affect the Canadian price level in the short run [increase, decrease, no effect, or indeterminate]?
[b] Assuming no government policy intervention, how would these two events affect the Canadian price level in the long run [increase, decrease, no effect, or indeterminate]?