1 Assume that the production of refrigerants necessarily leads to pollution of the atmosphere. Does the fact that a free competitive market will lead to overproduction of refrigerants mean that we would be better off producing none? Explain

2 Assume that the market for rice is perfectly competitive. What would happen in that market in the short run, and in the long run, if there was a permanent decrease in the demand for rice?

3 Imagine that you are an economist working for the Reserve Bank of Australia and you observe an unexpected and large increase in the unemployment rate. Explain how this would impact your advice on an appropriate monetary policy response.

4 Discuss the pros and cons of engaging in expansionary fiscal policy in response to a recession caused by a negative aggregate demand shock.