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.
> For most of the last century, wages and productivity— the key measure of the economy’s efficiency— have risen together, increasing rapidly through the 1950s and ’60s and far more slowly in the 1970s and ’80s. But in recent years, the productivity gains h
> Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Explain the when-to-work decision when technology advances.
> Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Draw a graph to show the effect of the new technology in the labour market.
> Suppose that the Canadian business cycle is best described by RBC theory and that a new technology increases productivity. Draw a graph to show the effect of the new technology in the market for loanable funds.
> How does the quantity theory of money help us to understand the process of deflation?
> How do real GDP and the price level change if the forecast of inflation is incorrect?
> What is deflation?
> How does expected inflation occur?
> What are the main criticisms of RBC theory and how do its supporters defend it?
> According to RBC theory, how does a fall in productivity growth influence investment demand, the market for loanable funds, the real interest rate, the demand for labour, the supply of labour, employment, and the real wage rate?
> What must happen to create a demand-pull inflation spiral?
> What are the four special forms of the mainstream theory of the business cycle and how do they differ?
> Explain the mainstream theory of the business cycle.
> Use the information on the Noth American wholesale market for roses in Problem 1. Who gains and who loses from this import quota? Information from Problem 1 is as follows: Wholesalers buy and sell roses in containers that hold 120 stems. The table prov
> Use the information on the Noth American wholesale market for roses in Problem 1 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 Nor
> Use the information on the Noth American wholesale market for roses in Problem 1. Who gains and who loses from this tariff? Information from Problem 1 is as follows: Wholesalers buy and sell roses in containers that hold 120 stems. The table provides da
> What is offshore outsourcing? Who benefits from it and who loses?
> How does cost-push inflation begin?
> Explain the effects of an import quota on domestic production, consumption, and price.
> Explain the effects of a tariff on domestic production, the quantity bought, and the price.
> What are the tools that a country can use to restrict international trade?
> How is the gain from exports distributed between consumers and domestic producers?
> How is the gain from imports distributed between consumers and domestic producers?
> With free trade between Australia and Canada, Australia would export beef to Canada. But Canada imposes an import quota on Australian beef. 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. Explain how this quota influences the price that Canadian consumers pay for beef, the quantity of beef produced in
> Suppose that in response to huge job losses in the Canadian textile industry, the Canadian government imposes a 100 percent tariff on imports of textiles from China. Explain how the Canadian and Chinese gains from trade will change. Who in Canada will lo
> Suppose that in response to huge job losses in the Canadian textile industry, the Canadian government imposes a 100 percent tariff on imports of textiles from China. Explain how the tariff on textiles will change the price that Canadian buyers pay for te
> 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.
> What is stagflation and why does cost-push inflation cause stagflation?
> 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 quantity of Canadian exports to Mexico and the Canadian government’s tarif
> A semiconductor is a key component in your laptop, cellphone, and iPod. The table provides information about the market for semiconductors in Canada. Producers of semiconductors can get $18 a unit on the world market. a. With no international trade, wha
> What does the Bank of Canada do to determine whether the overnight loans rate should be raised, lowered, or left unchanged?
> 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.
> With low interest rates, business investment and trade are expected to bring growth through 2016. 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. Explain the effects of business investment on aggregate demand. Would you expect it to have a multiplier effect? Why or why not?
> Why was the U.S. recovery from the 2008–2009 recession so slow?
> What are the policy actions taken by central banks in response to the financial crisis?
> What are the three ingredients of a financial and banking crisis?
> How is the overnight rate determined in the market for bank reserves?
> What must happen to create a cost-push inflation spiral?
> What is the Bank of Canada’s record in achieving its inflation-control target?
> 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
> 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.
> 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 do
> 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
