Suppose that the world price of steel is $100 a tonne, India does not trade internationally, and the equilibrium price of steel in India is $60 a tonne. India then begins to trade internationally. a. How does the price of steel in India change? b. How does the quantity of steel produced in India change? c. How does the quantity of steel bought by India change? d. Does India export or import steel and why?
> Inflation targeting promotes well-anchored inflation expectations, which facilitates more effective stabilization of output and employment. Thus inflation targeting can deliver good results with respect to output and employment as well as inflation. Expl
> What are the two parts of the inflation-control target?
> 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 was 2.1 percent, and the over
> 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 was 2.1 percent, and the over
> Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the United States would be plunged into a Japan-style slump, with house prices declining for years. Describe the time lags in the response of
> 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 States, Japan, and Europe. How was Canada’s budget deficit
> 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.
> 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. What do you think happened to i
> The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target. Explain how inflation targeting promotes full employment in the long run.
> According to RBC theory, what is the source of the business cycle? What is the role of fluctuations in the rate of technological change?
> 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 economic growth. What would be the
> What fiscal policy action might increase investment and speed economic growth? Explain how the policy action would work.
> Why might fiscal stimulus crowd out investment?
> How can the federal government use discretionary fiscal policy to stimulate the economy?
> What is the distinction between automatic and discretionary fiscal policy?
> Why are consumption taxes relevant for measuring the tax wedge?
> How does the tax wedge influence potential GDP?
> 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 deliberate decision to discour
> 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 deliberate decision to discour
> How does a tax on labour income influence the equilibrium quantity of employment?
> What is the distinction between deflation and a one-time fall in the price level?
> Explain the connection between a government budget deficit and a government debt
> U.S. regulators ordered the recall of more than 450,000 faulty tires. The Chinese producer of the tires disputed the allegations and hinted that the recall might be an effort to hamper Chinese exports to the United States. a. What does the news clip impl
> Use the information on the Noth American wholesale market for roses in Problem 1. Draw a graph to illustrate the effects of the import quota. On the graph, identify the the importers’ profit. Information from Problem 1 is as follows: W
> Use the information on the Noth American wholesale market for roses in Problem 1. 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. Information fro
> Use the information on the Noth American wholesale market for roses in Problem 1. 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 t
> Use the information on the North American wholesale market for roses in Problem 1 to: a. Explain who gains and who loses from free international trade in roses compared to a situation in which North Americans buy only roses grown locally. b. Calculate th
> 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 America
> 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 service contracts with someone else to help them do it. I
> 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 America
> 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 America
> Why don’t the winners from free trade win the political argument?
> What are the main reasons for imposing a tariff?
> Can protection save jobs and the environment and prevent workers in developing countries from being exploited?
> What are the infant industry and dumping arguments for protection? Are they correct?
> Explain who gains and who loses from an import quota and why the losses exceed the gains.
> Explain who gains and who loses from a tariff and why the losses exceed the gains.
> Why is the net gain from international trade positive?
> Describe the situation in the market for a good or service that Canada exports.
> 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 service contracts with someone else to help them do it. I
> Describe the situation in the market for a good or service that Canada imports.
> Italy has dropped its resistance to an E.U. trade agreement with South Korea, which will wipe out $2 billion in annual duties on E.U. exports. Italians argued that the agreement, which eliminates E.U. duties on South Korean cars, would put undue pressure
> Answer the following questions. a. What is the TPP? b. Who in Canada would benefit and who would lose from a successful TPP? c. Illustrate your answer to part (b) with an appropriate graphical analysis assuming that tariffs are not completely eliminated.
> The cost of protecting jobs in uncompetitive sectors through tariffs is high: Saving a job in the sugar industry costs American consumers $826,000 in higher prices a year; saving a dairy industry job costs $685,000 per year; and saving a job in the manuf
> 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 removed. Explain how the price that Canadian consumers pay for goods from Mexico and the quantity o
> South Korea will reopen its market to most Canadian beef. South Korea banned imports of beef in 2003 amid concerns over a case of mad cow disease. The ban closed what was then the fourth-largest market for Canadian beef, valued at $50 million a year. Ass
> South Korea will reopen its market to most Canadian beef. South Korea banned imports of beef in 2003 amid concerns over a case of mad cow disease. The ban closed what was then the fourth-largest market for Canadian beef, valued at $50 million a year. Exp
> 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. Problem 15(b) is as follows: The hunger crisis in p
> The hunger crisis in poor countries has its roots in Canadian, U.S., and European policies of subsidizing the diversion of food crops to produce biofuels like corn-based ethanol. That is, doling out subsidies to put the world’s dinner into the gas tank.
> Under what circumstances does the government have a budget surplus?
> Suppose that the world price of eggs is $1 a dozen, Canada does not trade internationally, and the equilibrium price of eggs in Canada is $3 a dozen. Canada then begins to trade internationally. a. How does the price of eggs in Canada change? b. Do Canad
> William Dudley, president of the New York Fed, raised the prospect of the Fed becoming more explicit about its inflation goal to “help anchor inflation expectations at the desired rate.” a. What monetary policy strategy is William Dudley raising? b. How
> 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 unemployme
> With low interest rates, business investment and trade are expected to bring growth through 2016. Explain the effects of the Bank of Canada’s low interest rates on business investment. Draw a graph to illustrate your explanation.
> 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. a. How would the Bank of Canada “maintain stimulus”
> 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. Explain the situation faced by the Bank of Canada i
> How does the Bank of Canada hit its overnight loans rate target?
> What are the possible monetary policy instruments and which one does the Bank of Canada use? How has its value behaved since 2000?
> 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 t
> Monetary policy is too important to be left to the Bank of Canada. The government should be responsible for it.” How is responsibility for monetary policy allocated between the Bank of Canada and the government?
> What are the main items of government revenues and outlays?
> Unemployment is a more serious economic problem than inflation and it should be the focus of the Bank of Canada’s monetary policy.” Evaluate this statement and explain why the Bank’s policy goal is a target inflation rate.
> How might using the Taylor rule improve the Fed’s monetary policy?
> How might inflation targeting improve U.S. monetary policy?
> How do the Bank’s actions influence the inflation rate and how long does it take for inflation to respond to the Bank’s policy changes?
> How do the Bank’s actions influence real GDP and how long does it take for real GDP to respond to the Bank’s policy changes?
> How do the Bank of Canada’s actions change the exchange rate?
> Do interest rates fluctuate in response to the Bank of Canada’s actions?
> Describe the channels by which monetary policy ripples through the economy and explain how each channel operates.
> What happens when the Bank of Canada buys securities in the open market?
> What is the operating band?
> 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 will “bring stagnation rather than prosperity.” The source of
> Summarize the Bank of Canada’s monetary policy decision-making process.
> What is the Bank of Canada’s monetary policy instrument?
> How does the core inflation rate differ from the overall CPI inflation rate?
> What is the Bank of Canada’s monetary policy objective?
> Answer the following questions. a. What was the state of the Canadian economy in 2014? b. What was Carolyn Wilkin’s expectation about future real GDP growth and inflation in September 2014? c. How would maintaining the overnight rate at 1 percent influen
> Inflation targeting promotes well-anchored inflation expectations, which facilitates more effective stabilization of output and employment. Thus inflation targeting can deliver good results with respect to output and employment as well as inflation. What
> Suppose that the Reserve Bank of New Zealand is following the Taylor rule. In 2009, it sets the official cash rate (its equivalent of the overnight loans rate) at 4 percent a year. If the inflation rate in New Zealand is 2 percent a year, what is its out
> U.S. Federal Reserve’s Plosser Opposes QE3 Federal Reserve Bank of Philadelphia president Charles Plosser does not think that monetary policy can “do much to speed up the slow progress” in the labour market and opposes the Fed’s latest round of stimulus,
> Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the United States would be plunged into a Japan-style slump, with house prices declining for years. If the U.S. Federal Reserve had agreed wi
> 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 influenc
> 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
> 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. How does the overnight loans ra
> 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. What role does the long-term re
> 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 was 2.1 percent, and the over
> 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 was 2.1 percent, and the over
> 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 was 2.1 percent, and the over
> Looking at the overnight loans rate since 2000, identify periods during which, with the benefit of hindsight, the rate might have been kept too low. Identify periods during which it might have been too high.
> The U.S. Federal Reserve Act of 2000 instructs the Federal Reserve to pursue its goals by “maintain[ing] long-run growth of the monetary and credit aggregates commensurate with the economy’s long-run potential to increase production.” a. How would follow
> 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 States, Japan, and Europe. a. How would the budget deficit
> 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 States, Japan, and Europe. How does a government get funds
> Suppose Parliament decided to strip the Bank of Canada of its monetary policy powers and decided to legislate interest rate changes. How would you expect the policy choices to change? Which arrangement would most likely provide price stability?
> Members expected real GDP growth to be moderate over coming quarters and then to pick up very gradually, with the unemployment rate declining only slowly. With longer-term inflation expectations stable, members anticipated that inflation over the medium
> The Bank of Canada and the Government of Canada have agreed that the Bank will achieve an inflation rate target. Based on the performance of Canadian inflation and unemployment, has the Bank’s inflation targeting been successful?
> The NDP called for immediate action to create jobs by investing in infrastructure and green energy programs to give the economy a kickstart. It needs more than corporate tax cuts, the NDP said. What would have a larger effect on aggregate demand: corpora
> The NDP called for immediate action to create jobs by investing in infrastructure and green energy programs to give the economy a kickstart. It needs more than corporate tax cuts, the NDP said. Explain whether, and if so how, “investing in infrastructure
> The NDP called for immediate action to create jobs by investing in infrastructure and green energy programs to give the economy a kickstart. It needs more than corporate tax cuts, the NDP said. Is the NDP’s proposed infrastructure spending a fiscal stimu
> 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 economic growth. Explain the effec
> The economy is in a recession, the recessionary gap is large, and there is a budget deficit. a. Do we know whether the budget deficit is structural or cyclical? Explain your answer and use a graph to illustrate it. b. Do we know whether automatic fiscal
