Y5

The following graph shows the interest rate in percent on Canadian 3-month corporate debt (blue line) and the interest rate in percent that the Bank of Canada paid on (excess) reserves (red line). The data are monthly and run from January 2000 through August 2022. 5 3 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 a. What do these data suggest about the relationship that exists between the reserves of Canadian commercial banks and 3-month corporate debt, a type of interest-bearing asset that Canadian commercial banks would typically hold? Briefly explain. b. When a central bank undertakes open market operations using a real asset to "back" its issue of fiat money, what does the theory imply will be the impact on the price level of such an exchange? C. Between January 2000 and August 2022, the monetary base in Canada increased 221% while the GDP deflator in Canada increased 55%. Do these data constitute a violation of the Quantity Theory? Briefly explain why or why not.The following graph shows the interest rate in percent on Canadian 3-month corporate debt (blue line) and the interest rate in percent that the Bank of Canada paid on (excess) reserves (red line). The data are monthly and run from January 2000 through August 2022. 5 3 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 a. What do these data suggest about the relationship that exists between the reserves of Canadian commercial banks and 3-month corporate debt, a type of interest-bearing asset that Canadian commercial banks would typically hold? Briefly explain. b. When a central bank undertakes open market operations using a real asset to "back" its issue of fiat money, what does the theory imply will be the impact on the price level of such an exchange? C. Between January 2000 and August 2022, the monetary base in Canada increased 221% while the GDP deflator in Canada increased 55%. Do these data constitute a violation of the Quantity Theory? Briefly explain why or why not