1.
What distinguishes money from other assets in the economy? (2 Marks)
2.
What are demand deposits, and why should they be included in the stock
of money? (2 Marks)
3.
If there was no item in the economy widely accepted in return for goods
and services, how would transactions be carried out in this economy? How
efficient would such a system be? (2 Marks)
4.
What is the difference between a medium of exchange and a store of
value? (4 Marks )
5.
What is the difference between commodity money and fiat money?
(2 Marks)
6.
Are credit cards money? (2 Marks)
7.
Under what circumstance can banks not influence the supply of money? (1
Mark)
8.
What are the two problems facing the Bank of Canada in trying to control
the money supply precisely? (2 Marks)
9.
Using separate graphs, demonstrate what happens to money supply, money
demand, the value of money and the price level if: (15 Marks)
1.
the Bank of Canada increases the money supply.
2.
people decide to demand less money at each price level.
3.
banks decide to hold more excess reserves.
10.According to the quantity theory of money, what is
the effect of an increase in the quantity of money? (2 Marks)
11.Suppose that the Bank of Canada sells 100 million
pounds sterling from its foreign exchange reserves, and that the exchange rate
is $2.40 Canadian per pound sterling. (5 Marks)
1.
Explain what happens to the Canadian money supply.
2.
Now suppose that the Bank of Canada does not want the money supply to
change. What would it need to do to sterilize its foreign exchange market
operation?
12.What is the maximum amount that the money supply
can increase when $1,000 cash is injected into a banking system with a
20-percent reserve requirement? Give two reasons why this maximum may not be
reached. (5 Marks)
13.Suppose that the T-account for Nan Bank Inc. is as
follows:
|
Assets
|
Liabilities
|
|
Reserves $100,000
|
Deposits $500,000
|
|
Loans $400,000
|
14.If the Bank of Canada requires banks to hold 5
percent of deposits as reserves, how much in excess reserves does Nan Bank Inc.
now hold?
15.Assume that all other banks hold only the required
amount of reserves. If Nan Bank Inc. decides to reduce its reserves to only the
required amount, by how much would the economy's money supply increase? (6
Marks)
16.The economy of Kyleland contains 2000 $1 bills. (20
Marks)
1.
If people hold all money as currency, what is the quantity of money?
2.
If people hold all money as demand deposits and the banks maintain 100 percent
reserves, what is the quantity of money?
3.
If people hold equal amounts of currency and demand deposits and the
banks maintain 100 percent reserves, what is the quantity of money?
4.
If people hold all money as demand deposits and the banks maintain a reserve
ratio of 10 percent, what is the quantity of money?
5.
If people hold equal amounts of currency and demand deposits and the
banks maintain a reserve ratio of 10 percent, what is the quantity of money?
17.Suppose that this year's money supply is $50 billion,
nominal GDP is $1 trillion, and real GDP is $500 billion. (20 Marks)
1.
What is the price level? What is the velocity of money?
2.
Suppose that velocity is constant and the economy's output of goods and
services rises by 5 percent each year. What will happen to nominal GDP and the
price level next year if the bank of Canada keeps the money supply constant?
3.
What money supply should the Bank of Canada set next year if it wants to
keep the price level stable?
4.
What money supply should the Bank of Canada set next year if it wants
inflation of 10 percent?
18.Explain how the aggregate supply and Phillips
curves are related to each other. Can any information be derived from one that
cannot be derived from the other? (10 Marks)