Posted by **kelvin** on Sunday, March 21, 2010 at 8:29pm.

3. Consumer spending on durables falls, draw a graph to analyze the effects of this change in real interset.

4. The Canadian demand for Mexican Pesos is downward sloping and supply of pesos is upward sloping. Assume a system of flexible exchange rate between Mexico and Canada, graphically illustrate and explain how each of the following would affect market value of Mexican Pesos.

a) Mexico encounters severe recession

b) the Mexico government encourages foreign investment in Mexico by tax policies.

5. What effects would each of the following have on equilibrium output and price?

a) an increase of the aggregate supply and a decrease in aggregate demand.

b) an equal increase in both aggregate supply and aggregate demand

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