1. If the Consumer Price Index for an economy was 133.0 in February 2016 and 137.0 in February 2017, what was the annual rate of inflation from Feb. 2015 to Feb. 2016?Show your calculations.
2. Identify and explain two types of leakages in the circular flow and how each impacts the GDP.
3. If business investment in capital increases by $5 Billion and leakages are 55% of new income, what would be the impact on the Gross Domestic Product?
4. If leakages are 50%, calculate the resulting change in GDP if taxes were increased by $5 B?
5. How can the Bank of Canada use open market operations to increase the Money Supply?
6. How can the Bank of Canada use open market operations to decrease the Money Supply?
7. How much can a new bank deposit of $5,000 potentially increase the money supply if banks hold only 10% of deposits in reserve?
8. Explain the inflationary and recessionary gaps. What happens to a recessionary gap in the long run without government intervention?
9. Under what conditions would the Bank of Canada be likely to increase its key policy interest rate?
10. The Phillips Curve shows a trade off between unemployment and inflation. Explain the trade off