WWW.YORKVILLEU.CA Unit 9 Questions Worth 4% of final grade 1. The figure shows an economy operating at a real GDP of Y1 and a price level of P1, at the intersection of AD1 and SRAS1. a) What kind of gap is the economy experiencing? b) What type of monetary policy (expansionary or contractionary) would be appropriate for closing the gap? c) If the Central Bank decided to pursue this policy, what type of open-market operations would it conduct? d) How would interest rates and investment change? e) How would the aggregate demand curve shift? BUSI 2003 - MACROECONOMICS IN GLOBAL CONTEXT 1 WWW.YORKVILLEU.CA 2. Trace the impact of a sale of government bonds by the Central bank on bond prices (means return on bond), interest rates, investment, aggregate demand, real GDP, and the price level. 3. Suppose the Central bank were required to conduct monetary policy so as to hold the unemployment rate below 4%. What implications would this have for the economy? BUSI 2003 - MACROECONOMICS IN GLOBAL CONTEXT 2