Settlement balances and on the overnight interest rate

Assignment Help Business Economics
Reference no: EM131097334

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.

Reference no: EM131097334

Questions Cloud

Communicate depends on age or generation : Do you believe the way leaders communicate depends on their age or generation? Explain why you agree or disagree with this statement and /or at least one of the readings. Practice using in-text citations for the article(s) as you write your respon..
Calculate the equilibrium price and quantity in the market : Market research has revealed the following information about the market for chocolate bars: The demand schedule can be represented by the equation Qd = 1.600 - 300P. where Qd is the quantity demanded and P is the price. Calculate the equilibrium pric..
Prepare an unadjusted trial balance from the spreadsheet : The company purchased $7,500,000 of raw material inventory on account. "On account" means that their suppliers have not yet been paid. Prepare an unadjusted trial balance from the spreadsheet
Perfectly price discriminating monopolist : Which of the following statements is true with respect to a market in which there is a perfectly price discriminating monopolist?
Settlement balances and on the overnight interest rate : 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). In the absence of any offsetting transactions by the Bank of Canada, explain the effects of this ne..
Summary on:the political dynamics of higher education policy : Write a summary of the following Article: The Political Dynamics of Higher Education Policy.
Determine the equivalent stress in the cylinder : Determine the maximum shear stress at the outer surface of the cylinder.
Expected utitily of income and utility of expected income : John has a risk asset worth Y and derives utility from the consumption of his wealth. Suppose W=100, L=36, P=0.5 , Find John's expected Utitily of income and Utility of expected income and explain that intuition behind each. Now suppose that he has a..
Determine the moment of this force about point o : 2/43 As a trailer is towed in the forward direction, the force F = 120 lb is applied as shown to the ball of the trailer hitch. Determine the moment of this force about point O.

Reviews

Write a Review

Business Economics Questions & Answers

  What price will the profit maximizing monopolist produce

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..

  Pecans or walnuts

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 normal good the income and substitution effects

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..

  Hospital cost

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.

  Economy achieve equilibrium at full employment

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..

  Decides to charge cola consumers a tax

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

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.

  Regarding how historian should chronicle a plague

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-money supply increases

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?

  Calculate the current years spending by category

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.

  Intermediaries come from a competitive marketplace

change if buyers pay $8 every unit to the intermediary but sellers offer to rebate part of that expense to buyers.

  Calculate optimal bundle of contingent claims

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..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd