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ssignment 1A (100 marks total)

Assignment 1 should be submitted after you have completed Units 1 through 5 (Chapters 1 to 12). It is worth 10% of your final grade. Insert your answer to each question below the question. Show your calculations. None of the assignment questions require you to provide a graph.

1. Identify each of the following topics as being part of microeconomics or macroeconomics. (5 marks)

a. the impact of a change in consumer income on the purchase of luxury automobiles
b. the effect of a change in the price of Coke on the purchase of Pepsi
the impact of a war in the Middle East on the rate of inflation in Canada
c. the effect of pollution taxes on the Canadian copper industry
d. the effect of a balanced-budget policy on economic stability
All correct 5 marks
2. Which of the following statements are positive and which are normative? (4 marks)

a. There is a tradeoff between inflation and unemployment in the short run.
b. If consumer income increases, other things equal, the demand for automobiles will increase.
c. Canadian workers deserve more liberal unemployment benefits.
d. If interest rates increase, investment will decrease.
All correct 4 marks
3. a. Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns and why? (4 marks)
An absolute advantage is when the producer requires a smaller quantity of inputs to produce a good. A comparative advantage is when we compare producers of a good according to their opportunity cost. It is more important to determine trade patterns through comparative advantage because with absolute advantage a producer could have an advantage is both goods. Where in a comparative…...

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