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Part B- Fiscal Policy Recommendation (5 Marks) Write recommendations for government fiscal policy (specific spending and taxation changes) that you feel would be best for
Part B- Fiscal Policy Recommendation (5 Marks) Write recommendations for government fiscal policy (specific spending and taxation changes) that you feel would be best for the Canadian economy using your understanding of the economics concepts taught in the course. Use the following guidelines as you write your recommendations: Give consideration to the impact your decisions would have on each of the economic indicators. Your discussion might consider some of the following topics: government debt and the budget surplus or deficit; the impact of these recommendations on government services; how Canadians will benefit from the recommended policies in the short term and in the long term; the multiplier effect; any potential problems with your recommendations. These are just some suggestions. Your argument should discuss several ways that your ideas will impact the economy. The recommendations you discuss could include several of these areas but you can use any relevant course concepts to justify your recommendations. Part C - Fractional Reserve Banking (5 Marks) The following is a simplified Balance Sheet for a Canadian bank: Great White North Bank Balance Sheet As at Dec. 31, 2021 Assets Liabilities Cash Reserves $ 20,000 Demand Deposits $100,000 Loans to Customers 50.000 Investment in Securities 30.000 Equity Fixed Assets 20.000 Shareholders' Equity 20.000 Total Assets $120,000 Total Liabilities & Equity $120,000 a. What percent of its demand deposits is this bank holding in cash reserves (the reserve ratio)? (1 mark) b. If a deposit of $10,000 is made, how much of this is lent out to maintain the same reserve ratio? How much can bank deposits in the system potentially increase as a result? (2 marks) C. Show the balance sheet after the bank receives the $10,000 deposit and then makes loans from that deposit. (2 marks)
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