Question

In the late 1990s, Canada experienced a technology boom. In part, the boom was due to a revolution in communication technology that resulted in a massive expansion of the Internet; in part, the boom was due to households and firms purchasing new computer equipment in anticipation of Y2K.

The economy would be affected because these events would:

Instructions: You may select more than one answer. Click the box with a check mark for correct answers, and click to empty the box for the wrong answers.

	increase aggregate demand
	increase aggregate supply
	decrease aggregate demand
	decrease aggregate supply

Ultimately, this will:

	increase GDP and decrease price.
	decrease GDP and decrease price.
	decrease GDP and increase price.
	increase GDP but the effect on price is not certain.

Answer 1

When households and firms are purchasing new computers, there is an increase in the consumption and investment which means that aggregate expenditure will increase. As a result there is an increase in aggregate demand. eventually when the aggregate demand curve shifts to the right there is an increase in the general price level and the level of GDP

at the same time because of technological boom there must be an increase in production due to which aggregate supply shifts to the right. This should decrease the general price level and increases the level of GDP

Increase aggregate demand , increase aggregate supply

Increase GDP but effect on price is not certain.