2. Draw the market for bananas in equilibrium. Show and explain what would happen on your graph if at the same time i) more banana suppliers entered the market and ii) people’s incomes went up. How would this affect the price and quantity of bananas in the market?
a) Which phase of the business cycle do you think China was experiencing in 2006 based on the sources above? Why? (Hint: Consider the macroeconomic indicators)
b) From 2005 to 2006 how did components of Chinese Aggregate Demand change according to the sources above?
c) Assume that the Chinese economy was at full employment in 2005. Demonstrate using graph what would have happened in the economy in 2006 to aggregate demand and how this would affect price level and real GDP. Explain your answer.
d) Go to the following website (https://tradingeconomics.com/china/indicators) and find China’s current macroeconomic indicators for 2017. Based on China’s inflation, GDP annual growth rate, unemployment rate and any other relevant statistics, what phase of the business cycle is Chinacurrently going through in your opinion? Support your answer with economic theory.