Please state whether you believe the following statements are true or false and back up?

1. Lowering taxes can raise production in the economy.


2. Higher interest rates can increase unemployment.


3. Higher interest rates can increase inflation.


4. If the value of the Canadian dollar increases, that is good for production and


employment in Canada.


5. If the Bank of Canada increases the money supply, that will increase production and


jobs in Canada.


6. If people save more money, our economy will grow more quickly.Please state whether you believe the following statements are true or false and back up?
1 yes


2 yes


3 no


4 can be yes, can be no


5 can be yes, can be no


6 can be yes, can be no, but in present situation, more likely to be no in the short term.





10 points please.Please state whether you believe the following statements are true or false and back up?
1) depends: lowering taxes will, in theory, increase consumption (although we have seen first hand that this is not always the case), which would increase production, however, it might also reduce government spending which would decrease production (if the government lowers its spending to compensate for its diminished tax revenue-- again this virtually never happens). So whatever effect is greater is where your answer lies.





2) true: higher interest rates deter investment because firms see it as too expensive to invest in new capital etc. (think of interest rates as the cost of borrowing for firms, if the interest rate/price goes up, the firm will choose not to borrow). If firms are not investing then production will go down and if production goes down jobs are lost thus unemployment goes up.





3) false: like we said before, higher interest rates decrease production, and a decrease in production can be seen by a downward shift in aggregate demand. If demand shifts down then prices go down meaning deflation, not inflation





4) false: if the value of the Canadian dollar increases then Canadians are able to buy more foreign goods at cheaper prices, making it hard for domestic firms to compete. They lose business because people are now choosing foreign goods over theirs. Since business is being lost firms don't produce as much which means they need to lay workers off.





5) true: think of a money demand and supply equilibrium, if the money supply shifted out, the interest rates would go down. If interest rates go down it promotes investment. If investment goes up, then production goes up and therefore there are more jobs available.





6) false: an economy grows through consumption not saving. If everyone saved more, aggregate consumption would decrease which would shift aggregate demand in which is the opposite of growth. Growth is inversely related with the savings rate.