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The United States is proposing a significant increase in duty on Canadian softlumber. USE APPROPRIATE DIAGRAMS to answer the following questions about the Canadian economy.
A. How would higher duty on softlumber affect the equilibrium income and the price level in the short run?

B. How would higher duty on softlumber affect the equilibrium income and price level in the long run? What assumptions did you make to arrive at this answer?

C. The Canadian finance minister has just announced a significant increase in government (program) spending. Will this help to offset the impacts of duty on softlumber? WHy or why not?

D. In (c) above, what will happen to inflation? Explain.

*Please answer the questions with their corresponding letters (A, B, C and D) for easier understanding.

*Please include all necessary graphs

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This job examines equilibrium income and the price level in the short run.

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