The idea that the economy is self correcting in the long run is a major tenet of __________________ __________________.

2. Suppose an economy begins in steady state. By what proportion does per capita GDP change in the long run in response to each of the following changes? (a) The investment rate doubles (b) the depreciation rate falls by 10% (c) The productivity level rises by 10% (d) an earthquake destroys 75% of the capital stock (e) A more generous immigration policy leads the population to double.

2. Aggregate supply (AS) denotes the relationship between the __________________ that firmschoose to produce and sell and the _________________, holding the price of inputs fixed.(A) total quantity; price level for output (B) type of goods; input price of raw materials(C) price of goods; number of employees (D) total inputs; types of goods

Q. In January 2009, the federal government announced an economic stimulus package of $35 billion in response to the recession in Canada. (a) Is this an example of hands-off or hands-on position on government policy? Explain.  (b) Where can you find out what happened to Canada’s GDP in the years following the stimulus spending?