Question 1

Explain how nominal GDP and the real interest rate are related to the transactions and asset demands for money.

Accepted Answer

The transactions demand for money has a

Question 2

What are the two reasons that people want to hold money? In other words, what are the two types of demand for money?

Accepted Answer

People want to hold money for

Question 3

How does monetary policy affect equilibrium GDP? How can it address the problem of recession or slow growth? Inflation?

Accepted Answer

Monetary policy affects the equilibrium

Question 4

The following are simplified balance sheets for the chartered banking system and the Bank of Canada.Perform the two following transactions, (1) and (2), making appropriate changes in columns (1) and (2) in each balance sheet.Do not cumulate your answers.Also, answer these three questions for each part: (a) What change, if any, took place in the money supply as a direct result of this transaction? (b) What change, if any, occurred in chartered bank reserves? (c) What change occurred in the money-creating potential of the chartered banking system if the reserve ratio is 20%? All figures are in billions of dollars.Consolidated Balance Sheet: Chartered Banking System
   Consolidated Balance Sheet: Bank of Canada
   (1) Suppose a drop in the bank rate causes chartered banks to borrow an additional$3 billion from the Bank of Canada.Show the new sheet figures in column 1.(2) The Bank of Canada buys $2 billion of government bonds from the public.Show the new sheet figures in column 2.

Accepted Answer

(1) (a) There is no direct change in the

Question 5

Explain how the net export effect strengthens the effects an easy money and a tight money policy.

Accepted Answer

With an easy money policy interest rates

Question 6

The following are simplified balance sheets for the chartered banking system and the Bank of Canada.Perform the two following transactions, (1) and (2), making appropriate changes in columns (1) and (2) in each balance sheet.Do not cumulate your answers.Also, answer these three questions for each part: (a) What change, if any, took place in the money supply as a direct result of this transaction? (b) What change, if any, occurred in chartered bank reserves? (c) What change occurred in the money-creating potential of the chartered banking system if the reserve ratio is 20%? All figures are in billions of dollars.Consolidated Balance Sheet: Chartered Banking System
   Consolidated Balance Sheet: Bank of Canada
   (1) Suppose a drop in the bank rate causes chartered banks to borrow an additional $2 billion from the Bank of Canada.Show the new sheet figures in column 1.(2) The Bank of Canada buys $3 billion of government bonds from the public.Show the new balance sheet figures in column 2.

Accepted Answer

(1) (a) There is no direct change in the

Question 7

Identify two key tools of monetary policy.

Accepted Answer

The two key tools of monetary

Exam 15: Part A: Interest Rates and Monetary Policy

Explain how nominal GDP and the real interest rate are related to the transactions and asset demands for money.

What are the two reasons that people want to hold money? In other words, what are the two types of demand for money?

How does monetary policy affect equilibrium GDP? How can it address the problem of recession or slow growth? Inflation?

Explain how the net export effect strengthens the effects an easy money and a tight money policy.

Identify two key tools of monetary policy.

Part A: Limits, Alternatives, and Choices

Part B: Limits, Alternatives, and Choices

Part A: The Market System and the Circular Flow

Part B: The Market System and the Circular Flow

Part A: Demand, Supply, and Market Equilibrium

Part B: Demand, Supply, and Market Equilibrium

Part A: Market Failures: Public Goods and Externalities

Part B: Market Failures: Public Goods and Externalities

Part A: Governments Role and Government Failure

Part B: Governments Role and Government Failure

Part A: An Introduction to Macroeconomics

Part B: An Introduction to Macroeconomics

Part A: Measuring the Economys Output

Part B: Measuring the Economys Output

Part A: Economic Growth

Part B: Economic Growth

Part A: Business Cycles, Unemployment, and Inflation

Part B: Business Cycles, Unemployment, and Inflation

Part A: Basic Macroeconomic Relationships

Part B: Basic Macroeconomic Relationships

Part A: The Aggregate Expenditures Model

Part B: The Aggregate Expenditures Model

Part A: Aggregate Demand and Aggregate Supply

Part B: Aggregate Demand and Aggregate Supply

Part A: Fiscal Policy, Deficits, Surpluses, and Debt

Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Part A: Money, Banking, and Money Creation

Part B: Money, Banking, and Money Creation

Part B: Interest Rates and Monetary Policy

Part A: Long-Run Macroeconomic Adjustments

Part B: Long-Run Macroeconomic Adjustments

Part A: International Trade

Part B: International Trade

Part C: Financial Economics

Part A: The Balance of Payments and Exchange Rates

Part B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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