1. Which of the following transactions will be included in the GDP for the 2020 in Canada? What category would they go into? Yes or No Category a. Lumber that was produced for the housing industry in 2020, but due to economic slowdown, it was not purchased and used to make houses b. The CRA audited many companies in the housing industry in 2020 c. The GM plant in Toronto produced car parts in 2020 and sold them to a GM car producer in the US in 2020 d. A dealership in Canada sells a used Camaro made in 1978 To a customer in 2020 and the saleslady makes a commission e. A Lexus dealership in Vancouver buys some computer 5 software to help track inventory. 2. Using the table, calculate the unemployment rate. In Millions Population over 15 who are not incarcerated 120 Volunteers 1 Discouraged workers 6 Persons who have not looked for a job in over 4 weeks 15 Employed workers 90 Unemployment Rate: 1 13. For each of the following statements, (1) identify the market that you are graphing (or the good you are drawing the market for), (2) show the changes on your graph, (3) identify the factor causing the change, (4) state what happens to the price and quantity (increase or decrease). Please use the format provided as an example in the question. a. Bob's burger joint notices that the price of hotdogs is increasing Market: Factor: Equilibrium Price: Equilibrium Quantity: b. Over the last year, consumers have expected the price of honey to increase due to the decrease in the numbers of European honeybees. Market: Factor: Equilibrium Price: Equilibrium Quantity:4. The table below gives data for a small economy in which there are two final goods induded in GDP: good X and good Y. Given the following data, answer the following questions. Show all your work, clearly indicating the operations you are conducting. Production Prices Good 2018 2019 2018 2019 X 50 40 $10 $15 Y 40 50 $20 $30 a. Calculate nominal GDP for each of these years. Nominal GDP 2019: b. Calculate real GDP for each for each of these years. Use 2018 as the base year. Real GDP 2019: c. Calculate the GDP deflator for 2019. Deflator 2019: d. Calculate the inflation rate between 2018 and 2019. Inflation Rate: e. Consider again the above table. Using 2018 as the base year, calculate a consumer price index for each year. CPI 2018: CPI 2019: 65. Suppose that you have the following information for an economy. GDP = $5000, C = $3500, G = $800, X = $400, IM = $500, T = $600, and TR = $200 a) What is investment in this economy? Investment: b) What is private savings? Private Savings: c) What is government savings? Government Savings: d) What is the capital inflow in this economy? 4 Capital inflow: 6. The following T-account shows the assets and liabilities of all banks in Canada. The reserve ratio is 10%. All financial transactions occur within the banking system. No one holds cash. Assets Liabilities Actual reserves $300 million Deposits $2500 million Loans $ 1500 million Bonds $700 million a) What is the amount of total desired reserves? What is the amount of excess reserves? Required Reserves:, Excess Reserves: b) What will be the final T-account after all of the excess reserves are loaned out? Assets Liabilities Actual reserves Deposits Loans Bonds c) After all the multiplier processes have taken place, what will be the change in money supply? Change in MS 77. Suppose that you have an economy where the government does not have a deficit and the demand for loanable funds and supply of loanable funds are as follows (if r = 0.2, it is an interest rate of 20%): Demand: r = 0.6 - 0.0002Q Supply: r = 0.0001Q a. Graph the demand and supply of loanable funds b. What is the equilibrium interest rate and equilibrium quantity in the market? Interest rate: Quantity: c. Now the government has a budget deficit that causes the supply of loanable funds to change to r= 0.03 + 0.0001Q. What is the new equilibrium interest rate and quantity? Interest rate: Quantity: d. Is there crowding out in this economy with the new deficit? If so, calculate the amount that private investment is being crowded out and explain why it is happening. Crowding out: 6 58. Do the following events have their Initial or short run Impact on aggregate demand, long run aggregate supply, or short run aggregate supply? Do the curves shift to the right or to the left? Show, using a graph for each question. a. The new government in Canada increases subsidies to producers of raw materials. AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: b. There has been a decrease in nominal wages across Canada. AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: c. Canadian producers expect the future demand for their products will be high due to increases in incomes earned across Canada AD/AS/LRAS: 9 Equilibrium Price: Equilibrium Quantity: 69. Suppose the economy had been operating at its potential level of real GDP in the past, but consumer and investment spending have suddenly and substantially increased causing inflation. The increase is expected to last for a significant period of time. (a) Use an appropriate diagram to illustrate the initial impact of stated event on the economy. (b) What impact would the event have on the economy's [i] price level, [ii] level of real GDP, [ili] unemployment rate, and [iv] government budget deficit [i.e. increase, decrease, no effect, indeterminate]? [i] Price: [ii] Real GDP: [ili] Unemployment: [iv] Budget Deficit: (c) Describe two different examples of government fiscal policy that could be used to correct the situation outlined at the start of the question. (2 marks) Lii 7Use an appropriate diagram to illustrate the impact of stated event on the economy of the fiscal policies you have described. (d) When compared to the economy's position prior to the use of such policies, what specific impact would the fiscal policies have on the economy's [i] price level, [ii] level of real GDP, [ili] unemployment rate, and [iv] government budget deficit [i.e. increase, decrease, no effect, or is the outcome indeterminate]? [i] Price: [ii] Real GDP: [ili] Unemployment: [iv] Budget Deficit: 12