1.a. Explain the three key functions of the Bank of Canada

b. In the Canadian banking system, the target reserve ratio is 20 per cent and the estimated value of the cash drain ratio is 5 per cent. What is the total value of new deposits from a new deposit in a bank of $500.00? (show your calculations).

2 a. Explain the three basic functions of money.

b. Briefly explain how the bank of Canada could increase spending in the economy with an increase in the money supply using the reserve ratio requirements.

3 a. What are the two key approaches used in the new economic growth theories to explain why their theories are different from the established Neoclassical Growth theory

b. Explain the fundamental determinants of long-term economic growth for an economy

4 Consider the Canadian economy that is in long-run equilibrium with an output equal to Y*. The United States economy goes into a major slowdown causing a significant decrease in goods and services shipped into the United States from Canada. For Canada, answer the following questions:

a. What kind of shock occurred- aggregate demand or aggregate supply?

b Explain how fiscal policies by the government of Canada can be used to drive the economy back towards Y* in the long run.Explain the steps

5A review of the economic performance of the Canadian economy by economists at the Bank of Canada suggests that the economy has an inflationary output gap.

Explain how the Bank of Canada could use monetary policy instruments to close the inflationary output gap. Explain the process (mechanism) through which this occurs.