Question 1 (18 marks)

- If Canada can produce 600 tons of wheat per person and the USA can produce 300 tons of wheat per person, or Canada could make 30 cars per person and the USA could produce 60 cars per person,

i) Calculate for each country the opportunity cost of one car if the production possibilities in each country is a straight line ( not a curve);

ii) the trade opportunities for each country. [ use calculations and be specific]

- the effect on the Canadian dollar if the demand in Europe for the Canada Goose winter coats imported from Canadian manufacturers increases.

- the effect on the Canadian dollar if the demand in Canada for the same coat is less.

- if the cause of the increase in price of a Canada Goose coat in Canada is demand-pull inflation , what does this mean? Please provide a definition and an example.

- what is the usual alternative to demand-pull inflation? Please provide a definition and an example of a good for which this alternative causes inflation