Question #1: (Topic #6: Chapter 20 & Topic #7: Chapter 21)

Transcription

1 Question #1: (Topic #6: Chapter 20 & Topic #7: Chapter 21) Base Year = 2010 Item Price 2010 Quantity 2010 Price 2011 Quantity 2011 Coffee Pizza $ $ Gasoline $ $ Calculate CPI ANSWER: 2. Calculate Inflation for 2011using CPI. ANSWER: 3. Calculate the GDP Deflator for ANSWER: 4. Calculate Inflation for 2011 using GDP Deflator. ANSWER:

2 Question #2 (Topic #7: Chapter 21) In Canada the working-age population is 20 million. Eight million are full-time workers and two million are part-time workers with fifty percent of these individuals wanting full-time work. There are one million people unemployed with 0.4 million of those unemployed are frictional and 0.2 are structural. Answer the following questions: 1. Calculate the Labour Force. ANSWER: 2. Calculate the Labour Force Participation Rate. ANSWER: 3. Calculate the Unemployment Rate. ANSWER: 4. Calculate the Involuntary Part-Time Rate. ANSWER: 5. Calculate the Employment-to-Population Ratio. ANSWER: 6. What is the Natural Rate of Unemployment? ANSWER: 7. What is the amount of Cyclical Unemployment? ANSWER: 8. Is the economy in a Recession or Expansion? How do you know? ANSWER:

3 Question #2: (Topic #9: Chapter 23) The table below shows the economy s demand and supply for loanable funds. Real Interest Rate Loanable Funds Loanable Funds Loanable Funds Loanable Funds (%) Demanded (D0) Supplied (S0) New Demand (D1) New Supply (S1) What is the Equilibrium Real Interest Rate? ANSWER: 2. What is the Equilibrium Quantity of Investment? ANSWER: 3. What is the Equilibrium Quantity of Savings? ANSWER: 4. If planned savings increases by $0.5 at each real interest rate, then a. Does this shift the Demand or the Supply Curve? ANSWER: b. Does it shift the curve in (a) left or right? ANSWER: c. Fill in the appropriate column in the table above. d. What is the NEW Equilibrium Real Interest Rate? ANSWER: e. What is the NEW Equilibrium Quantity of Investment? ANSWER: f. What is the NEW Equilibrium Quantity of Savings? ANSWER: 5. Start by assuming the ORGINAL Demand & Supply Curves provided in the table above. If planned investment increases by $1.0 at each real interest rate, then a. Does this shift the Demand or the Supply Curve? ANSWER: b. Does it shift the curve in (a) left or right? ANSWER: c. Fill in the appropriate column in the table above. d. What is the NEW Equilibrium Real Interest Rate? ANSWER: e. What is the NEW Equilibrium Quantity of Investment? ANSWER: f. What is the NEW Equilibrium Quantity of Savings? ANSWER: 6. USING the NEW DEMAND and the NEW SUPPLY Curves. What would be the NEW Equilibrium Real Interest RATE? ANSWER:

4 Question #3: (Topic #3: Chapter 24(1)) The Bank of Speedy Creek s assets include cash in the vault of $50,000; deposits at the Bank of Saskatchewan in the amount of $150,000; loans of $700,000 and $1.1 million of securities. The Bank of Speedy Creek has $2.0 million in liabilities, i.e. chequing account balances. The public holds $400,000 in cash. 1. Calculate the desired reserve ratio. (R/D) ANSWER: 2. Calculate the currency drain ratio. (C/D) ANSWER: 3. Calculate the money multiplier. (MM) ANSWER: The Bank of Saskatchewan wants to increase the money supply in the Province of Saskatchewan by $1 million. 4. Will the B of S, buy or sell securities to the Bank of Speedy Creek? ANSWER: 5. What is the dollar amount securities the B of S will buy or sell? ANSWER: {Show Work} 6. Will the B of S, increase or decrease the Bank s Reserves? ANSWER: 7. How much will the B of S change the Reserves by? ANSWER: 8. What will be the new amount of Excess Reserves at the Bank of SC? ANSWER: 9. How much will the Bank of SC change their loans? ANSWER: 10. How much will be RE-Deposited into the second bank? ANSWER: {Show Work} 11. How much will be drained by the public in the form of cash? ANSWER: {Show Work} 12. Prove the Money Supply will increase by $1 million. {Show Work}.

5 Question #5: (Topic #4: Chapter 25) 1. Using the Exchange Rate table fill in the 4 boxes with the answer and SHOW WORK. US Dollars (USD) Japanese Yen (JYP) Canadian Dollar (CAD) USD (A) = JYP (B) = 1.00 (D) = CAD 1.06 (C) = Over the November break you shop for a new laptop. You find identical DELL laptops in Canada selling for CAD$1,000 and in the United States selling for US$750. Assume no taxes or transportation costs, etc. (a) Where would you buy the laptop if the exchange rate between the Canadian dollar and the U.S. dollar was US$0.80 per CAD? {SHOW Calculations to prove your answer.} ANSWER: (b) If the Canadian dollar depreciated to US$0.74, then which country would you now buy the laptop? {SHOW Calculations to prove your answer.} ANSWER:

6 3. Using the information provided in the table answer the following questions. Transaction Amount (Billions of Dollars) Exports of Goods & Services 100 Imports of Goods & Services 130 Transfers to the Rest of the World 20 Loans to the Rest of the World 60 Loans from the Rest of the World? Increases in Official Reserves 10 Net Interest Income to the Rest of the World 0 1. What is the Official Settlements Balance? ANSWSER: 2. What is the Current Account Balance? ANSWER: 3. What is the amount of loans from the Rest of the World? ANSWER: 4. What is the Capital Account Balance? ANSWER: 5. What is the Balance of Payments in this question? ANSWER: {PROVE your answer is Correct, use the formula}