Unit 7 Exercises

Due in Unit 7

Worth 2.5% of final grade

Questions

1.Assume a government has a balanced budget. What would happen in the bond market if the government imposes expansionary fiscal policy by increasing spending while maintaining existing tax revenues. Explain your answer. (25 points)

2.Explain different tools that a government has to impose fiscal policy. Provide two examples that government of Canada used during the COVID-19 pandemic. You can read more about government actions during the pandemic here (25 points)

3.https://www.canada.ca/en/department-finance/economic-response-plan.html

4.What is an appropriate monetary policy during the pandemic? Pick a country of your choice and use FRED economic database to support your answer. (You must include graph for the data in your answer) (25 points)

5.By referring to the website of the Bank of Canada (https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/covid-19-actions-support-economy-financial-system/) provide two economic policies that the central bank imposed in response to COVID-19. Explain transition mechanism for these policies. By referring to what you learned in the class clearly explain how these policies could change GDP, prices, and unemployment rates in Canada. (25 points)