Economics Grade 12 Exam Short Answer Help! 10 pts!?

Question

Hi guys! Here is the question:

Identify and describe the major economic problem that afflicts Adanac's economy. Discuss possible soluitions and evaluate their effectiveness.

(I dont want crazy long answers. I just need ideas. Don't want to kill you guys lol)

Here are the ECONOMIC STATS FOR ADANAC

http://i101.photobucket.com/albums/m48/craddlee/eco.jpg?

t=1213656976

Consider Poverty, employment, national trade, interest rate, Bank of Canada, Infaltion. Also, what is happening as trends and how they interrelate.

dont have to ans everything. best answer 10 pts

Answer 1

Dude I dont think anyone will answer this its way to hard.

Answer 2

Assumptions: CPI measures also producer price index (since we don't have more data), all values are given in nominal expression (except GDP); quarters are numbered as Q-I, Q-II (no data), Q-III (no data). Q-IV (aka last quarter), Q-I' (estimate).

Just some facts about this economy:

1) Inventories fell between Q-I and Q-IV which means or slow down in production or high consumption or depletion (obsolence) after inventories reevaluation or high damages.

2) Unemployment increased between Q- and Q-IV (reasons unknown - may be just seasonal fluctuation)

3) Inventories grow slower than GDP

4) Capital formation grow faster than GDP - may mean that economy is switching to capital-intensive production, capital (it's MPC) is relatively cheaper than labor, thus real wages tend to rise over some period.

5) Inflation between Q-IV and  Q-I' is too low while year inflation is 12.1% (!) too high for such GDP growth. Means there were sort of expansionary monetary policy somethere between Q-I and Q-IV to stimulate economy (confirms volatility in unemployment rate)

6) Last (this) quarter capital formation shows relatively high growth (boost) in it - meaning that there were foreign investments or changes in saving rates or partial elimination of undergraund economy.

Seems like this economy just recovered from risk of "very slow growth" period (so popular now risk of recession) - though it might be just due to seasonality.

You can make (create) some desirable scenarios (conclusions) from these facts using logic and additional information (if available)