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microeconomics principles

Microeconomics Canada In The Global Environment 9th Edition Robin Bade, Michael Parkin - Solutions

Explain how lowering taxes on employment will create jobs. Use a graph to illustrate your answer.William Watson, an economics professor at McGill University, Montreal, says there’s nothing magical, mystical, or personal about job creation. It occurs when someone who wants to sell a product or
Explain why fiscal stimulus was needed in 2008 but not in 2012.China’s economy is slowing from its normal 9 percent or higher economic growth rate to just below 9 percent. The source of the slowdown is the global economic slowdown that is restricting exports growth and the government’s
Explain the effects of the Bank of Canada’s low interest rates on business investment. Draw a graph to illustrate your explanation.With low interest rates, business investment and trade are expected to bring growth through 2016.
Explain the effects of business investment on aggregate demand. Would you expect it to have a multiplier effect? Why or why not?With low interest rates, business investment and trade are expected to bring growth through 2016.
On September 15, 2014, the OECD predicted that global growth would continue at a moderate rate and that Canada’s economic growth will strengthen. If the OECD forecasts turn out to be correct, what would most likely happen to the output gap and unemployment in 2015 and 2016?
How do the Bank of Canada’s actions change the exchange rate?
If the Bank of Canada started to raise the overnight loans rate in 2015, explain the process by which this policy action would change real GDP.
How does a government get funds to cover a budget deficit? How does financing a budget deficit affect the central bank’s monetary policy?In the 1980s, it was Argentina, Mexico, and the Philippines that struggled with unsustainable debt loads. In the 1990s, it was Russia and the go-go economies of
How was Canada’s budget deficit of 2013 influenced by the Bank of Canada’s low interest rate policy?In the 1980s, it was Argentina, Mexico, and the Philippines that struggled with unsustainable debt loads. In the 1990s, it was Russia and the go-go economies of East Asia. Today, it is the United
a. How would the budget deficit change in 2015 and 2016 if the Bank of Canada moved interest rates up?b. How would the budget deficit change in 2015 and 2016 if the Bank of Canada’s monetary policy led to a rapid appreciation of the dollar?In the 1980s, it was Argentina, Mexico, and the
Why might the Bank of Canada decide to raise the overnight rate in 2015?At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 percent, the inflation rate
Why might the Bank of Canada decide to lower the overnight rate in 2015?At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 percent, the inflation rate
High Food and Energy Prices Here to Stay On top of rising energy prices, a severe drought, bad harvests, and a poor monsoon season in Asia have sent grain prices soaring. Globally, this is the third major food price shock in five years. The Telegraph, August 29, 2012 Explain what type of inflation
Some events occur and the economy experiences a demand-pull inflation. What might those events have been? Describe their initial effects and explain how a demand-pull inflation spiral results.The economy starts out on the curves labelled AD0 and SAS0. Price level (GDP deflator, 2007=
Some events occur and the economy experiences a cost-push inflation. What might those events have been? Describe their initial effects and explain how a cost-push inflation spiral develops.The economy starts out on the curves labelled AD0 and SAS0. Price level (GDP deflator, 2007=
Some events occur and the economy is expected to experience inflation. What might those events have been? Describe their initial effects and what happens as an expected inflation proceeds.The economy starts out on the curves labelled AD0 and SAS0. Price level (GDP deflator, 2007=
After you have studied Economics in the News, answer the following questions.a. What happened to the foreign exchange value of the U.S. dollar in July and August 2014?b. What could the Bank of Canada have done to stop the fall in the Canadian dollar?c. What could the European Central Bank have done
How does demand-pull inflation begin?
What type of inflation process does John Cochrane warn could happen? Explain the role that inflation expectations would play if the outbreak of inflation were to “happen with little warning.”John H. Cochrane, a professor of finance at the University of Chicago, thinks we face the risk of
Explain why the inflation that John Cochrane fears would “bring stagnation rather than prosperity.”John H. Cochrane, a professor of finance at the University of Chicago, thinks we face the risk of inflation, and if inflation does break out the Fed will not have the ability to stop it and it
What are the consequences of deflation?
The 2011 inflation control target agreement between the Government of Canada and the Bank of Canada runs to the end of 2016.a. What role does the inflation control agreement say about the Bank’s control of the quantity of money?b. Why is it important that the agreement be renewed in 2016 and what
Does Canada have a stable short-run Phillips curve? Explain why or why not.
What would be the effect of the budget deficit of 2011 on real GDP and jobs?Jim Flaherty tabled a 2011 budget with a deficit for this year gradually falling to a surplus in 2015. Mr. Flaherty said the budget aims to find that balance between helping Canadian families and businesses and securing
Explain the effect on real GDP and jobs of the government’s commitment to cut its budget deficit over the next four years. Jim Flaherty tabled a 2011 budget with a deficit for this year gradually falling to a surplus in 2015. Mr. Flaherty said the budget aims to find that
After the first two months of the current fiscal year, Canada’s deficit sits at $4.4 billion, compared with $7.5 billion in the same period of 2009 when the economy was still in recession. The government projects that the budget shortfall of $54 billion it had at the end of the last fiscal year
Suppose that capital income taxes are based (as they are in Canada and most countries) on nominal interest rates. If the inflation rate increases by 5 percent a year, explain and use appropriate graphs to illustrate the effect of the rise in inflation on:a. The tax increase on capital incomeb. The
Does William Watson think that job creation is primarily a problem that needs an increase in aggregate demand or aggregate supply?William Watson, an economics professor at McGill University, Montreal, says there’s nothing magical, mystical, or personal about job creation. It occurs when someone
Would you expect automatic fiscal policy to be having an effect in 2012? If so, what effects might it have?China’s economy is slowing from its normal 9 percent or higher economic growth rate to just below 9 percent. The source of the slowdown is the global economic slowdown that is restricting
Why might stimulus come too late? What are the potential consequences of stimulus coming too late?China’s economy is slowing from its normal 9 percent or higher economic growth rate to just below 9 percent. The source of the slowdown is the global economic slowdown that is restricting exports
After you have studied Economics in the News on pp. 720 – 721 , answer the following questions.a. What was the state of the Japanese economy in 2013?b. Explain the effects of Japan’s high level of government spending and debt on the level of employment and potential GDP.c. Explain how inflation
In The New York Times articles and in blogs, economists Paul Krugman and Joseph Stiglitz say that, with slow recovery from recession, there is a need for more fiscal stimulus in both the United States and Europe despite the large federal budget deficit and large deficits in some European
What are the two parts of the inflation-control target?
Explain the situation faced by the Bank of Canada in 2011.During 2011, Canada is in an environment of substantial headwinds from Europe and the United States, and monetary policy may need to maintain stimulus to achieve the inflation target at full employment.
What is the operating band?
a. How would the Bank of Canada “maintain stimulus”?b. Why might the Bank of Canada decide to lower the interest rate in the face of “headwinds”?During 2011, Canada is in an environment of substantial headwinds from Europe and the United States, and monetary policy may need to maintain
What actions might the Bank of Canada take to stimulate business investment further?With low interest rates, business investment and trade are expected to bring growth through 2016.
Do interest rates fluctuate in response to the Bank of Canada’s actions?
Explain how inflation targeting promotes full employment in the long run.The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target.
Explain the conflict between inflation targeting and unemployment targeting in the short run.The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target.
Why was the U.S. recovery from the 2008–2009 recession so slow?
How might inflation targeting improve U.S. monetary policy?
If a tariff of $25 per container is imposed on imports of roses, explain how the price of roses, the quantity of roses bought, the quantity produced in North America, and the quantity imported change.Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the
How might the Bank of Canada’s decisions that raised the overnight loans rate from 0.25 percent to 1 percent have been influenced by the unemployment rate and the inflation rate?At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans
Explain the dilemma that rising inflation and high unemployment poses for the Bank of Canada.At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 percent,
Why might the Bank of Canada decide to keep the overnight loans rate at 1 percent in 2014?At the end of 2009, the unemployment rate was 8.3 percent, the inflation rate was 0.8 percent, and the overnight loans rate target was 0.25 percent. In mid- 2014, the unemployment rate was about 7 percent, the
If an import quota of 5 million containers is imposed on roses, what happens to the North American price of roses, the quantity of roses bought, the quantity produced in North America, and the quantity imported?Wholesalers buy and sell roses in containers that hold 120 stems. The table provides
Who gains and who loses from this import quota?Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalers’ demand and the supply schedule is the North American rose
Who gains and who loses from this tariff?Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalers’ demand and the supply schedule is the North American rose growers’
What role does the long-term real interest rate play in the monetary policy transmission process?From 2007 to 2009, the long-term real interest rate paid by the safest corporations increased from 2.3 percent to 3.8 percent. During that same period, the overnight loans rate fell from 4.5 percent to
Draw a graph of the North American market for roses to illustrate the effects of the tariff. On the graph, identify the tariff revenue from imported roses.Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America.
How does the overnight loans rate influence the long-term real interest rate?From 2007 to 2009, the long-term real interest rate paid by the safest corporations increased from 2.3 percent to 3.8 percent. During that same period, the overnight loans rate fell from 4.5 percent to 0.25 percent a year.
Traders continued to make bets in favour of the yen, sending the U.S. dollar to a record low against the Japanese currency.a. How do “bets in favour of the yen” influence the exchange rate?b. How does the U.S. Federal Reserve’s monetary policy influence the exchange rate?
What is inflation targeting and how do “well-anchored inflation expectations” help to achieve more stable output as well as low inflation?Inflation targeting promotes well-anchored inflation expectations, which facilitates more effective stabilization of output and employment. Thus inflation
Draw a graph to illustrate the effects of the import quota. On the graph, identify the the importers’ profit.Wholesalers buy and sell roses in containers that hold 120 stems. The table provides data about the wholesale market for roses in North America. The demand schedule is the wholesalers’
Draw a graph of the market for corn in the poor developing country in Problem 15(b) to show the changes in the price of corn, the quantity produced, and the quantity consumed by people in that country.
Explain how South Korea’s import ban on Canadian beef affected beef producers and consumers in South Korea. Draw a graph of the beef market in South Korea to show how this ban changed the price of beef, the quantity produced, the quantity consumed, and the quantity imported.South Korea will
Assuming that South Korea is the only importer of Canadian beef, explain how South Korea’s import ban on beef affected beef producers and consumers in Canada. Draw a graph of the Canadian beef market to illustrate your answer.South Korea will reopen its market to most Canadian beef. South Korea
Explain how the price that Canadian consumers pay for goods from Mexico and the quantity of Canadian imports from Mexico have changed. Who are the winners and who are the losers from this free trade?Before 1995, trade between Canada and Mexico was subject to tariffs. In 1995, Mexico joined NAFTA
Explain how the quantity of Canadian exports to Mexico and the Canadian government’s tariff revenue from trade with Mexico have changed.Before 1995, trade between Canada and Mexico was subject to tariffs. In 1995, Mexico joined NAFTA and all Canadian and Mexican tariffs have gradually been
Suppose that in 2014 tomato growers in Ontario lobby the Canadian government to impose an import quota on Mexican tomatoes. Explain who in Canada would gain and who would lose from such an import quota.
Explain who in Canada gains from the quota on beef imports and who loses.With free trade between Australia and Canada, Australia would export beef to Canada. But Canada imposes an import quota on Australian beef.
The Bank of Canada sells $20 million of securities to the Bank of Nova Scotia. Enter the transactions that take place to show the changes in the following balance sheets: Bank of Canada Assets (millions) Bank of Nova Scotia Assets (millions) Liabilities (millions) Liabilities (millions)
Money in Canada today includes which of the following items? Cash in CIBC’s cash machines; Bank of Canada dollar bills in your wallet; your Visa card; your loan to pay for school fees.
Europe’s Banks Must Be Forced to Recapitalize E.U. banks must hold more capital. Where private funding is not forthcoming, recapitalization must be imposed by E.U. governments.What is the “capital” referred to in the news clip? How might the requirement to hold more capital make banks safer?
What are the main components of money in Canada today?
Why are cheques and credit cards not money?
The People’s Bank of China announces it will cut the required reserve ratio. Explain how lowering the required reserve ratio will impact banks’ money creation process.
What are the functions of depository institutions?
How have depository institutions made innovations that have influenced the composition of money?
Starbucks customers can now pay for their coffee using their smartphone. Does this mean the move to electronic payments is finally coming? If people can use their smartphones to make payments, will currency disappear? How will the components of M1 change?
What are the Bank of Canada’s two main policy tools?
How does an open market operation change the monetary base?
How does financial regulation in Canada help minimize the cost of bank failure? Does it bring more stability to the banking system?
Explain the distinction between a central bank and a chartered bank.
What limits the quantity of money that the banking system can create?
The U.S. Federal Reserve discussed “a new largescale asset purchase program” commonly called “QE3.” Some members said such a program could help the economy by lowering long-term interest rates and making financial conditions, more broadly, easier. They discussed whether a new program should
Explain the change in the nominal interest rate in the short run if:a. Real GDP increases.b. The Bank of Canada increases the quantity of money.c. The price level rises.
After you have studied Economics in the News on pp. 584 – 585 , answer the following questions.a. What changes in the interest rate and the quantity of M2 occurred between 2007 and 2014?b. When the interest rate fell, why did the quantity of M2 demanded increase?c. How would you interpret the
Did the U.S. dollar appreciate or depreciate against the Canadian dollar? Did the U.S. dollar appreciate or depreciate against the yen?The U.S. dollar exchange rate increased from $0.96 Canadian in June 2011 to $1.03 Canadian in June 2012, and it decreased from 81 Japanese yen in June 2011 to 78
What was the value of the Canadian dollar in terms of U.S. dollars in June 2011 and June 2012? Did the Canadian dollar appreciate or depreciate against the U.S. dollar over the year June 2011 to June 2012?The U.S. dollar exchange rate increased from $0.96 Canadian in June 2011 to $1.03 Canadian in
What was the value of 100 yen in terms of U.S. dollars in June 2011 and June 2012? Did the yen appreciate or depreciate against the U.S. dollar over the year June 2011 to June 2012?The U.S. dollar exchange rate increased from $0.96 Canadian in June 2011 to $1.03 Canadian in June 2012, and it
On March 30, 2012, the U.S. dollar was trading at 82 yen per U.S. dollar on the foreign exchange market. On August 30, 2012, the U.S. dollar was trading at 79 yen per U.S. dollar.a. What events in the foreign exchange market could have brought this fall in the value of the U.S. dollar?b. Did the
What makes the demand for Canadian dollars change?
What makes the supply of Canadian dollars change?
What is arbitrage and what are its effects in the foreign exchange market?
With the strengthening of the yen against other currencies in 2012, Japan’s central bank did not take any action. A Japanese politician called on the central bank to take actions to weaken the yen, saying it will help exporters in the short run and have no long-run effects.a. What is Japan’s
The table gives some information about Canada’s international transactions in 2010.a. Calculate the balance on the three balance of payments accounts.b. Was Canada a net borrower or a net lender in 2010? Explain your answer. Item Imports of goods and services Net foreign investment in
What makes an exchange rate hard to predict?
Suppose that yesterday the Canadian dollar was trading on the foreign exchange market at 0.75 euros per Canadian dollar and today the Canadian dollar is trading at 0.80 euros per Canadian dollar. Which of the two currencies (the Canadian dollar or the euro) has appreciated and which has depreciated
Suppose that the exchange rate fell from 80 yen per Canadian dollar to 70 yen per Canadian dollar. What is the effect of this change on the quantity of Canadian dollars that people plan to buy in the foreign exchange market?
Suppose that the exchange rate rose from 80 yen per Canadian dollar to 90 yen per Canadian dollar. What is the effect of this change on the quantity of Canadian dollars that people plan to sell in the foreign exchange market?
Today’s exchange rate between the yuan and the U.S. dollar is 6.40 yuan per dollar, and the central bank of China is buying U.S. dollars in the foreign exchange market. If the central bank of China did not purchase U.S. dollars would there be excess demand or excess supply of U.S. dollars in the
What is a fixed exchange rate and how is its value fixed?
In 2011, the exchange rate changed from 94 yen per U.S. dollar in January to 84 yen per U.S. dollar in June, and back to 94 yen per dollar in December. What information would you need to determine the factors that caused these changes in the exchange rate? Which factors would change both demand and
Canada produces natural resources (coal, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand.a. Explain how growth in the demand for Canada’s natural resources would affect the demand for Canadian dollars in the foreign exchange
Explain why Mr. Reddy is investing in the U.S. real estate market.Rahul Reddy, an Indian real estate entrepreneur, believes that “The United States is good for speculative higher-risk investments.” He profited from earlier investment in Australia, and a strong Australian dollar provided him
Explain what would happen if the speculation made by Mr. Reddy became widespread. Would expectations become self-fulfilling?Rahul Reddy, an Indian real estate entrepreneur, believes that “The United States is good for speculative higher-risk investments.” He profited from earlier investment in
What was the exchange rate policy adopted by China until July 2005? Explain how it worked. Draw a graph to illustrate your answer.In 2007, the U.S. trade deficit with China hit $256.3 billion, the largest deficit ever recorded with a single country. Chinese currency, the yuan, has risen in value by
Is Canada a net borrower or a net lender? Is it a debtor or a creditor nation?

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