1)a) Distinguish between physical capital and financial capital and give two examples of each. b)What is the distinction between gross investment and net investment?

c)What are the three main types of markets for financial capital?

d) Explain the connection between the price of a financial asset and its interest rate.

e)Under what circumstances does the government have a budget surplus?

f)Explain the connection between a government budget deficit and a government debt.

2a) What is the loanable funds market?

b) How do firms make investment decisions?

c) What determines the demand for loanable funds and what makes it change?

d) How do households make saving decisions?

e) What determines the supply of loanable funds and what makes it change?

f) How do changes in the demand for and supply of loanable funds change the real interest rate and quantity of loanable funds?

3)a)What are the tools that a country can use to restrict international trade?

b) Explain the effects of a tariff on domestic production, the quantity bought, and the price. c) Explain who gains and who loses from a tariff and why the losses exceed the gains. d)Explain the effects of an import quota on domestic production, consumption, and price. e)Explain who gains and who loses from an import quota and why the losses exceed the gains.

f) What are the three ingredients of a financial and banking crisis?

g)What are the policy actions taken by central banks in response to the financial crisis?

4a) What is the Bank of Canada's monetary policy objective?

b)What are the two parts of the inflation-control target?

c)How does the core inflation rate differ from the overall CPI inflation rate?

d) What is the Bank of Canada's record in achieving its inflation-control target?

5a)What is the Bank of Canada's monetary policy instrument?

b)Summarize the Bank of Canada's monetary policy decision-making process.

c)What is the operating band?

d) What happens when the Bank of Canada buys securities in the open market?

e) How is the overnight rate determined in the market for bank reserves?

6) f the natural unemployment rate increases, what happens to the short-run Phillips curve and the long-run Phillips curve?

b)What is deflation?

c) What is the distinction between deflation and a one-time fall in the price level?

d) What causes deflation?

e) How does the quantity theory of money help us to understand the process of deflation? f)What are the consequences of deflation? How can deflation be ended?