Article 1: National small business confidence in 'low gear'

Ted Mallett, Financial Post, October 8th 2010

Confidence among Canada's small- and mid-sized business owners fell in September, continuing a declining trend since May. Canadian Federation of Independent Business (CFIB)'s Business Barometer Index fell more than a full point to 63.6, from August's mediocre level of 64.9. According to past results, index levels normally range between 65 and 75 when the economy is growing.

Explain and illustrate using the Y=AE and the AD/AS/LAS diagrams how a drop in business confidence would affect the economy in the short run. Also describe the effects on unemployment and inflation rates