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macroeconomics canada in the global environment

Questions and Answers of Macroeconomics Canada In The Global Environment

Discuss the insights from economics for a real-world problem such as congestion.
The U.S. Department of Treasury maintains a learning vault at www.treasurydirect.gov. Go to this site and search for "faq about public debt" to answer the following questions:a. What percent of the
The Social Security Network is a source of information on the current debate about Social Security. Go to its home page (www.socsec.org) to answer the following questions:a. Summarize the current
If future economic growth rates average as little as 2.4 percent-far slower than the 3.0 percent average growth rate the U.S. economy posted over the last 75 yearsthe Social Security system will
After President George W. Bush's election in 2000, he proposed cutting taxes.a. Would you consider that proposal Keynesian, Classical, or a combination of the two?b. From your response, how should
To help understand the distributional consequences of the tax cuts advocated by many conservative politicians, answer the following:a. What income groups have the largest marginal propensity to
Assume that a country's real growth is 2 percent per year, while its real deficit is rising 5 percent a year. Can the country continue to afford such deficits indefinitely? What problems might it
Assume a country's nominal GDP is $600 billion, government expenditures less debt service are $145 billion, and revenue is $160 billion. The nominal debt is $360 billion. Inflation is 3 percent and
Canada's debt was $576 billion at the end of 2001. Using the information below (in billions of Canadian dollars), fill in the blanks for Canada's budget balance and debt for the following years: LO1
Economist Paul W. McCracken stated, "A decision to go with budgets that involve deficits is a decision to have a future economy delivering lower incomes." Do you agree or disagree? Why? (Difficult)
What are two solutions to the "real" problem posed by the growing number of retiring baby boomers beginning in 2020? LO6
How did the Social Security system contribute to the surpluses of the late 1990s? LO6
Why is debt service an important measure of whether debt is a problem? LO4
How can a government that isn't running a deficit still get itself into financial trouble? LO4
If all of the government's debt were internal, would financing that debt make the nation poorer? LO4
List three ways in which individual debt differs from government debt. LO4
"The debt should be of concern." What additional information do you need to undertake a reasonable discussion of this statement? LO4
How would your answer to question 5 differ if you knew that expected inflation was 15 percent? LO3
Inflation is 20 percent. Debt is $2 trillion. The nominal deficit is $300 billion. What is the real deficit? LO3
Two economists are debating whether the target rate of unemployment is 4 percent or 6 percent. Mr. A believes it's 4 percent; Ms. B believes it's 6 percent. One says the structural deficit is $40
If the structural budget deficit is $100 billion, the actual deficit is $300 billion, what is the size of the passive or cyclical deficit? LO2
Your income is $40,000 per year; your expenditures are $45,000. You spend $10,000 of that $45,000 for tuition. Is your budget in deficit or surplus? Why? LO1
What are the two ways government can finance a budget deficit? LO1
One of the problems with fiscal policy is the delay between the time government recognizes that the economy is in a recessionary gap (or inflationary gap) and the time it takes to change spending or
The Virtual Economy home page provides a model of the British economy in which you can play the role of Chancellor, the person who helps determine levels of taxation and spending in Britain. Go to
Any policy has both advantages and disadvantages, implying that policy makers must weigh both the advantages and disadvantages when deciding what policy to follow.a. Does society share absolute,
When Professor Robert Gordon lowered his estimate of the target unemployment rate from 6 percent to 5.5 percent in early 1995, he quipped, "I've just created 600,000 jobs."a. What events in the 1990s
A tax cut has just been announced. Congressman Growth states that its effect will be on the supply side. Congressman Stable states that its effect will be on the demand side.a. Demonstrate
Congratulations! You've just been appointed chairman of the Council of Economic Advisers in Textland. The mpe is .8. There is a recessionary gap of $400.a. The government wants to eliminate the gap
The economy is below potential. Demonstrate with the AS/AD model what an economist from each of the following schools of thought believes should be done to address an economy that is below potential.
Explain the place of activist fiscal policy in directing the economy according to each of the following points of view:a. Sound finance.b. Functional finance.c. Nuanced functional finance.d. New
Why are incentive effects particularly important considerations for New Classical economists? LO5
How do New Classicals today differ from economists who promoted sound finance in the 1930s? How are they the same? LO5
Use the AS/AD model to explain the maxim in politics that if you are going to increase taxes, the time to do it is right after your election, when reelection is far off. LO3
Use the AS/AD model to explain why most presidents advocate government spending programs when running for reelection. LO3
How do automatic stabilizers work? How can they slow an economic recovery? LO4
How are state balanced-budget requirements procyclical? LO4
How does the budget process make fiscal policy difficult to implement? LO3
If interest rates have no effect on investment, how much crowding out will occur? LO2
According to crowding out, how is government spending offset by a reduction in private spending? LO2
Why is functional finance difficult to implement? LO2
What is functional finance? LO2
According to the Ricardian equivalence theorem, why is government spending offset by a reduction in private spending? LO1
Why does sound finance not depend on the Ricardian equivalence theorem? LO2
The National Bureau of Economic Research publishes nontechnical summaries of economic papers. Go to www.nber.org/digest/dec97/w6062.html to read the summary of "Does Inflation Harm Growth?" to answer
Economagic is a comprehensive site of free, easily available economic time series data useful for economic research, in particular economic forecasting. Go to the site www.economagic.com and find
This chapter discusses causes of inflation.a. Do you believe the cause of inflation is to be found in the institutional structure of wage- and price-setting institutions or in excess demand for goods
When it comes to understanding inflation, and even other aspects of the business cycle, ecological economists will often emphasize the role of energy, and especially oil, in shaping macroeconomic
The Book of Leviticus states, "You shall do no injustice in judgment, in measurement of length, weight, or volume. You shall have just balances, just weights, a just ephah, a just hin. I am the Lord
European Community Bank (ECB) governing council member Erkki Liikanen was quoted in a 2004 Wall Street Journal article as saying, "The stronger we get the productivity growth... the more room we will
In the mid-1990s and through the early 2000s, Japan's annual money supply growth rate fell to 1-2 percent from an average annual rate of 10-11 percent in the late 1980s. What effect did this decline
Grade inflation is widespread. In 1990, 81 percent of the students who took the SATs had an A or B average, but 40 percent of them scored less than 390 on the verbal SAT. Students' grades are
In the early 1990s, Argentina stopped increasing the money supply and fixed the exchange rate of the Argentine austral at 10,000 to the dollar. It then renamed the Argentine currency the "peso" and
Assume the money supply is $500, the velocity of money is 8, and the price level is $2. Using the quantity theory of money:a. Determine the level of real output.b. Determine the level of nominal
What is the reasoning behind the view that there is a trade-off between inflation and growth? LO6
The Phillips curve is just a figment of economists' imagination. True or false? LO5
If people's expectations of inflation didn't change, would the economy move from a short-run to a long-run Phillips curve? LO5
Draw both a short-run and a long-run Phillips curve. What does each say about the relationship between inflation and unemployment? LO5
What would Alfred Marshall likely say about the cost-push/demand-pull distinction? LO4
What is the insider/outsider theory of inflation? Would quantity or institutional theorists likely believe this theory? LO4
What is the direction of causation between money and prices according to the institutional theory of inflation? LO4
Who is more likely to support monetary rules-a quantity theorist or an institutionalist? Explain your answer. LO3
Define the inflation tax. Who pays it? LO3
If governments are aware that increases in the money supply cause inflation, why do some countries increase the money supply by significant amounts anyway? LO3
For what countries is the connection between the growth in the money supply and inflation still evident? What accounts for this? LO3
Why did the relationship between growth in the money supply and inflation break down in the 1990s? LO3
What does the quantity theory predict will happen to inflation if the money supply rises 10 percent? LO3
What three assumptions turn the equation of exchange into the quantity theory of money? LO3
If productivity growth is 3 percent and wage increases are 5 percent, what would you predict inflation would be? LO2
If you base your expectations of inflation on what has happened in the past, what kind of expectations are you demonstrating? LO2
Why do lenders lose out in inflation? Under what conditions would they not lose out? LO1
Go to the New York Fed's Web site at www.nv.frb.org/research/current issues/ci2-7.pdf to read "The Yield Curve as a Predictor of Recessions." Then answer the following questions:a. Why should the
Go to the Federal Reserve's home page at www.federalreserve.gov.a. Who is the chairman of the board? For how long has he or she served?b. Who are the governors of the board?c. The site publishes a
Fill in the blanks in the following table: LO6
Committee members tell you the reserve ratio is 0.1 and the cash-to-deposit ratio is 0.3. They ask you what directive they should give to the open market desk. You tell them, being as specific as
Congratulations! You have been approved adviser to the Federal Reserve Bank.a. The Federal Open Market Committee decides that it must increase the money supply by
One of the proposals to reform monetary policy has been to have the central bank pay interest on reserves held at the bank.a. What effect would that proposal have on excess reserves?b. Would banks
Some individuals have suggested raising the required reserve ratio for banks to 100 percent.a. What would the money multiplier be if this change were made?b. What effect would such a change have on
Suppose the Fed decides that it needs to pursue a contractionary policy. It wants to decrease the money supply by $2 million. Assume people hold 20 percent of their money in the form of cash
Suppose the Fed decides it needs to pursue an expansionary policy. Assume people hold no cash, the reserve requirement is 20 percent, and there are no excess reserves.a. Show how the Fed would
Explain how the Fed can achieve its goals using the following tools:a. Change the reserve requirement.b. Change the discount rate.c. Use open market operations. LO3
The money multiplier is 3 and people hold no cash. For each 1 percentage point the discount rate falls, banks borrow an additional
The Fed wants to increase the money supply (which is currently 4,000) by
Demonstrate the effect of expansionary monetary policy in the AS/AD model when the economy isa. Below potential output.b. Significantly above potential output. LO1
How are transparency and credibility related? LO6
How might an inflation target policy impair the ability of the Fed? LO6
How does a policy regime differ from a policy? LO6
Does it matter to policy makers how people form expectations? LO6
Why would policy makers pay attention to the shape of the yield curve? LO6
What is an inverted yield curve? Are you more likely to see one when the Fed is implementing contractionary or expansionary monetary policy? LO6
If the nominal interest rate is 6 percent and inflation is 5 percent, what's the real interest rate? LO6
You can lead a horse to water, but you can't make it drink. How might this adage be relevant to expansionary (as opposed to contractionary) monetary policy? LO6
Why is the effective supply curve for money horizontal? LO6
Target inflation is 2 percent; actual inflation is 3 percent. Output equals potential output. What does the Taylor rule predict will be the Fed funds rate? LO5
The table below gives the Fed funds rate target at the end of each year shown.Using these figures, describe how the monetary policy directions changed from 2003 through 2006. LO5 Year Federal Funds
Explain the relationship between tools, operating targets, intermediate targets, and ultimate targets. Give examples of each. LO4
Define the Federal funds rate and explain why it is the interest rate that the Fed most directly controls. LO4
Why would a bank hold Treasury bills as secondary reserves when it could simply hold primary reserves-cash? LO3
"The effects of open market operations are somewhat like a stone cast in a pond." After the splash, discuss the first three ripples. LO1, LO3
If the Federal Reserve announces a change in the direction of monetary policy, is it describing an offensive or defensive action? Explain your answer. LO3

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