1. Explain how each of the following examples illustrates one of the three principles of economy-wide interactions.

a. The White House urged Congress to pass major tax cuts in the spring of 2001, when it became clear that the U.S. economy was experiencing a slump.

b. Oil companies are investing heavily in projects that will extract oil from the “oil sands”

of Canada. In Edmonton, Alberta, near the projects, restaurants and other consumer businesses are booming.

c. In the mid-2000s, Spain, which was experiencing a big housing boom, also had the highest inflation rate in Europe.