Reference no: EM132405775

1. Implementation of monetary policy is fraught with many pitfalls. One important problem is deciding whether the central bank should target the money supply or target the interest rate. Assuming that the goal is to reduce inflation, explain the primary concern with each of these two different targets.
2. Explain the difference between currency and bank money. Which institutions in Canada are responsible for producing these two types of money? Explain fully.
3. Why are there two measures of GDP? How is the income measure different from the expenditure measure? Why must the two measures, using different data, be equal? Why might they not be equal? Why do we need to compute nominal and real GDP using both measures?
4. Explain fully how the AS/AD model is related to the Keynesian model and how it is different from the Keynesian model.
5. Explain fully how an easy money policy can lower the interest rate in the short-run but increase the interest-rate in the long-run. Be sure to distinguish between real and nominal interest rates.
6. What are the three sources of funding a national debt? Why are they all problematic? Why is foreign debt far more problematic for a country than domestic debt?
7. Why does a flexible exchange rate make monetary policy more effective but fiscal policy less effective?
8. Explain the difference between a trade deficit, a current account deficit, and a balance of payments deficit. Explain fully why a current account deficit can be good for a country.
9. Why is money important for an economy?
10. Real GDP can increase both because an economy has unemployment and because of economic growth. Explain fully the difference between these two ways of increasing GDP. Why does the Keynesian model focus only on increasing GDP by reducing unemployment and not on economic growth?