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Suppose that there is a net government disbursement of $80 (i.e., the government’s payments to the public exceed its receipts from the public by $80).
a) In the absence of any offsetting transactions by the Bank of Canada, explain the effects of this net government disbursement on settlement balances and on the overnight interest rate.
Use the reserve market diagram to explain your answer.
b) Explain how the Bank of Canada can use the auction of government deposits to neutralize the effects of this net government disbursement on settlement balances and on the overnight interest rate so that the Bank’s target for the overnight interest rate is maintained. Show the effects of this neutralizing procedure on the on the balance sheets (T-accounts) of the Bank of Canada and the LVTS Participants.
Suppose a monopolist faces the following demand curve: P=420-4Q. Marginal cost of production is constant and equal to $36, and there are no fixed costs. What is the monopolist's profit maximizing level of output? What price will the profit maximizing..
Smith likes cashews better than almonds and likes almond better than walnuts. He likes pecans equally as macadamia nuts and prefers macadamia nuts to almonds. Pecans or walnuts?
For a “normal” good, the income and substitution effects are not opposing forces. That is, for a “normal” good, the substitution and income effects of an increase in the price will both cause a reduction in the quantity purchased. Assuming both types..
A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, what did the hospital cost approximately.
Find aggregate output (Y) and the rate of interest (i) in this economy. Is the government's budget balanced, in surplus or deficit? If full-employment output is 830 and the Fed increases the money supply from 150 to 160, will economy achieve equilibr..
Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 25,000 cases of cola were sold every week at a price of $7 per case. After the tax, 18,000 cases of cola are sold every week; consumers pay $8 per case (includin..
describe how the US oil companies can remain competitive in the US market when over 35% of crude oil is currently sourced from domestic deep water drilling.
What common assumptions guide the Thucydides and Procopius readings regarding how a historian should chronicle a plague? What different assumptions do they possess about both human behavior and the role divine forces play in human history? How do bot..
Velocity remains constant at 8 and the money supply increases from $200 billion to $300 billion. The? original, nominal GDP was $ __ trillion? The ?new, nominal GDP is $ __ trillion?
Your job – from the available facts, calculate the current year’s spending by category and in total. Then, calculate the expected spending next year assuming no changes are made to the plan.
change if buyers pay $8 every unit to the intermediary but sellers offer to rebate part of that expense to buyers.
Tony Taxpayer earns $2000 in income. Income is taxed at 20%. Tony can underreport his income to the IRS and pay taxes only on the amount he reports, but should he be audited, the IRS will impose a surcharge of 200% on his unpaid taxes; Calculate Tony..
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