Reference no: EM132185634
Questions -
1) Identify whether or not each of the following transactions would be included in GDP, and, if it is included in GDP, which expenditure component it is part of.
a) An accountant receives payment for preparing a client's personal income tax return.
b) An owner of a Canada Savings Bond is paid interest on this bond.
c) A business buys a new piece of production equipment.
d) A student is paid for shovelling a neighbour's sidewalk.
e) An unemployed carpenter receives an employment insurance payment.
f) A town council hires a contractor to do paving work on the town's roads.
g) A newspaper publisher buys newsprint to add to its inventories of supplies.
h) An electronic hobbyist sells a used computer to a friend.
i) A fisher receives a government subsidy to help relocate to a larger community.
j) A Canadian business sells medical equipment to a Japanese hospital.
k) A wealth-holder sells 1000 shares issued by a Canadian corporation.
l) A homeowner repairs his own leaking roof.
2) Why do prices tend to rise over time?
3) What type of unemployment does each of the following situations describe?
a) An instructor at a ski resort is laid off in April
b) A factory worker is laid off during an economic recession
c) A restaurant server quits their job after completing their diploma in graphic design
d) A construction worker is laid off in December
e) A factory worker is laid off when the plant invests in new automated machinery
f) An accountant leaves their current job to find a management position at a new firm
g) A journalist at a local newspaper loses their job when the newspaper is forced to shut down, after years of declining readership
4) Canada's economy is in equilibrium. Using the ideas of withdrawals and injections, will the following changes cause an economic contraction or expansion?
a) Households begin to save a greater portion of their income.
b) An increase in oil prices causes Canada's exports to increase in value.
c) The federal government has been running a balanced budget. It now decides to run a budget deficit.
d) The federal government has been running a balanced budget. It now decides to run a budget surplus.
e) Car manufacturers build new factories in Ontario.
f) Due to a new health fad, Canadians buy more tropical fruits.
5) What is the key difference between automatic and discretionary fiscal policy?
6) What is one way that fiscal policy is superior to monetary policy? What is one way monetary policy is superior to fiscal policy?
7) Identify which of the three functions of money is most relevant in the following situations:
a) A consumer compares prices on various brands of clothing.
b) A restaurant-owner writes a cheque to pay for food purchases.
c) A wealth-holder temporarily keeps part of her financial assets in a chartered bank deposit.
d) A borrower deposits currency in his chartered bank to pay off a loan.
e) An item receives a series of bids before being sold on an online auction.
f) A bank withdraws monthly service charges from a deposit-holder's account.
8) In what key way do the four common definitions of the money supply (M1+, M2, M2+, M3) differ?
9) Canada's monetary policy is controlled by the Bank of Canada. It is a part of Canada's stabilization policy, along with fiscal policy.
a) What are the goals of Canada's monetary policy?
b) What is the main tool of monetary policy?
10) Assume that Canada is experiencing a mild recession. The unemployment rate has increased to 7% and the inflation rate has fallen to 0%.
a) Will the Bank of Canada use expansionary or contractionary monetary policy?
b) What will the Bank of Canada do to implement its expansionary/contractionary monetary policy?
c) How will this policy affect households and businesses willingness to borrow and save?
d) How will this policy affect spending levels in the economy?
11) Assume that Canada is experiencing an economic boom. The unemployment rate has fallen to 4% and the inflation rate has increased to 4%.
a) Will the Bank of Canada use expansionary or contractionary monetary policy?
b) What will the Bank of Canada do to implement its expansionary/contractionary monetary policy?
c) How will this policy affect households and businesses willingness to borrow and save?
d) How will this policy affect spending levels in the economy?
12) What is the key take away from the Phillips curve?
13) For each of the following transactions, identify where it appears on Canada's current account and whether it is classified as a receipt or a payment.
a) A Canadian movie chain purchases the rights to screen an Italian film in Canada.
b) An American family purchases a Canadian-made trailer for their summer vacation.
c) A Canadian sends a monetary gift to relatives in India.
d) A Canadian shareholder receives dividends from a Japanese corporation.
14) For each of the following transactions, identify where it appears on Canada's capital and financial accounts and whether it is classified as a receipt or a payment.
a) A British wealth-holder purchases bonds issued by a Canadian provincial government.
b) An Australian mining company is purchased by a Canadian-owned corporation.
c) A Canadian receives a monetary bequest from a Spanish relative.
d) A Norwegian shipping company opens a bank deposit in Canada.
15) For each of the following situations, describe whether the CADUSD exchange rate will increase or decrease.
a) Demand for crude oil, a key Canadian export, decreases.
b) There are signs that the CADUSD exchange rate will decrease in the near future.
c) Canada's interest rate falls relative to the US.
d) Prices in Canada fall relative to the US.
16) What is the most important determinant of what a country exports and imports?
17) International trade is a complex part of the global economy.
a) Explain the key positives of international trade.
b) Explain the key negatives of international trade.