Download Question 1: (1 point) Output per worker Clothing Food in Canada 10

Question 1: (1 point)
Output per worker
in Canada
in Britain
Clothing
10
2
Food
8
4
In the above Table, Britain has an absolute advantage in both goods.
(a) True
(b) False
Question 2: (1 point)
No country can have a comparative advantage in everything.
(a) True
(b) False
Question 3: (1 point)
The real interest rate is the nominal interest rate minus the rate of inflation.
(a) True
(b) False
Question 4: (1 point)
International trade allows a country to produce a combination of goods lying outside its production possibility
curve.
(a) True
(b) False
Question 5: (1 point)
The demand for French wine is one source of supply of French francs on the foreign exchange markets.
(a) True
(b) False
Question 6: (1 point)
If a chartered bank decided to keep ten percent excess reserves, the magnitude of the money multiplier
would decrease.
(a) True
(b) False
Question 7: (1 point)
Economies of scale are the primary reason why coffee is grown in Brazil rather than British Columbia.
(a) True
(b) False
Question 8: (1 point)
The appropriate strategy for the Bank of Canada during a depression is to sell government bonds, to make
low-risk, sound assets available for the chartered banks to buy.
(a) True
(b) False
Question 9: (1 point)
When the Bank of Canada increases its purchases of government securities, it is engaging in an
expansionary act; when it sells government securities, it is engaging in a restrictive act.
(a) True
(b) False
Question 10: (1 point)
A foreign exchange market is a market in goods imported from foreign countries.
(a) True
(b) False
Question 11: (9 points)
For the following table calculate the government surplus/deficit at each
year and calculate the total government debt. (Ensure you use negative
signs where appropriate when entering your answers)
Cumulative
Government
Surplus/ Deficit
Debt
(-)
(Don't use
negative sign)
____________ ____________
Year
Taxes
Government
Spending
1
60
90
2
70
110
____________
____________
3
80
120
____________
____________
4
90
125
____________
____________
5
100
135
____________
Question 12: (1 point)
Fill in the blanks:
Indicate whether the following policy statement is Fiscal or Monetary or Neither
Increasing its deposits with the chartered banks ____________
Question 13: (1 point)
Fill in the blanks:
Indicate whether the following policy statement is Fiscal or Monetary or Neither
Eliminate accelerated write offs on research and development ____
Question 14: (1 point)
Fill in the blanks:
Indicate whether the following policy statement is Fiscal or Monetary or Neither
Entering the open market and selling securities (bonds) ____________
Question 15: (1 point)
Fill in the blanks:
Indicate whether the following policy statement is Fiscal or Monetary or Neither
Increasing the reserve ratio ____________
Question 16: (1 point)
Fill in the blanks:
Indicate whether the following policy statement is Fiscal or Monetary or Neither
Increase Central Bank deposits in the chartered banks ____________
Question 17: (1 point)
Fill in the blanks:
Indicate whether the following policy statement is Fiscal or Monetary or Neither
Alberta decides to join OPEC
Question 18: (8 points)
Using the data in the table below, answer the following questions. (Hint: draw a graph when possible)
Money Demand
Interest Rate%
(billions of dollars)
14
200
13
220
12
240
11
260
10
300
9
360
8
420
7
500
6
600
Assume that the money supply is equal to 260
Part 1: What is the equilibrium rate of interest? ____________
Part 2: Assume that the Bank of Canada buys bonds and increases the money supply to 420 What is the
equilibrium rate of interest? ____________
Part 3: A fall in income causes the demand for money to 1)INCREASE 2)No Change or
3)Decrease__________ by 60 billion. If the money supply is 180, what is the equilibrium rate of
interest? ____________
Part 4: Assuming the change in part 3, if money supply is 440, what is the equilibrium rate of
interest? ____________
Part 5: An increase in income causes the transaction demand for money to 1)INCREASE 2)No Change or
3)Decrease __________ by 40 billion at each interest rate. (Assume the change in part 3 did not occur.
Given a money supply of 260, what is the equilibrium rate of interest? ____________
Part 6: Given the change in part 5, if money supply is 400, what is the equilibrium rate of
interest? ____________
Question 19: (15 points)
The balance sheet below shows the effect of a new 3,400 deposit in Bank A. Assume that the commercial
banks have established a 14 percent desired reserve and that no bank holds excess reserves.
BANK A
Assets
Liabilities
Reserves 3,400
Deposits 3,400
Loans 0
Assume that Bank A lends its excess reserves to Mr. Jones who spends the proceeds of the loan. Show
Bank A's new balance sheet
Assets
Reserves ____________
Loans ____________
BANK A
Liabilities
Deposits ____________
The money Mr. Jones borrows is deposited in Bank B. Bank B lends its excess reserves to Mr. Smith. Show
Bank B's balance sheet after the loan has been made out.
BANK B
Assets
Liabilities
Reserves ____________
Deposits ____________
Loans ____________
The money Mr. Smith borrows is deposited in Bank C. Bank C lends its excess reserves to Mr. Black. Show
Bank C's balance sheet after the loan has been made out.
BANK C
Assets
Reserves ____________
Loans ____________
Liabilities
Deposits ____________
The money Mr. Black borrows is deposited in Bank D. Bank D lends its excess reserves to Mr. Green. Show
Bank D's balance sheet after the loan has been made out.
BANK D
Assets
Liabilities
Reserves ____________
Deposits ____________
Loans ____________
If the above process continues to completion, the following totals will exist for the banking system:
Part 7: Deposits ____________
Part 8: Reserves ____________
Part 9: Loans ____________
Question 20: (1 point)
Fill in the blanks:
An absolute advantage is a necessary condition for gains from trade. No or Yes____
Question 21: (1 point)
Fill in the blanks:
If with one unit of resources region A can make more of product X than a similar unit in region B, region A is
said to have a comparative advantage over B in the production of X. No or Yes ____
Question 22: (1 point)
Fill in the blanks:
For trade to take place, it is sufficient for a Country to have an absolute advantage in the production of some
other commodity. No or Yes ____
Question 23: (1 point)
Fill in the blanks:
Opportunity Cost and Comparative Advantage can be expressed in terms of each other. No or Yes ____
Question 24: (5 points)
The following table shows how much wine and cloth can be produced in Canada and in Portugal
with the same amount of resource input. ( Ensure you put only the numbers, not the words 'cloth'
and 'wine' when entering your answer)
Canada
Portugal
Wine (barrels)
30
180
Cloth (meters)
90
360
1. The opportunity cost of 1 barrel of wine in Canada is? ____________
2. The opportunity cost of 1 barrel of wine in Portugal is? ____________
3. Portugal will export wine to Canada, if 1 barrel of wine can be traded for more than how many
meter(s) of cloth? ____________
4. Canada will import wine from Portugal provided that 1 meter of cloth trades for more than how
many barrel(s) of wine? ____________
5. If the international rate of exchange is 1 wine = 2.4 cloth can the two countries trade with each
other? (Enter 1 or 2: 1 = yes or 2 = no) ____________
Question 25: (1 point)
Fill in the blanks:
Assume the exchange rate was fixed at 1 Canadian dollar for 1 American dollar. Would the following
events cause pressure on the Canadian dollar to Appreciate or Depreciate?
A rise in the American rate of interest to a level substantially higher than that in Canada ____________
Question 26: (1 point)
Fill in the blanks:
Assume the exchange rate was fixed at 1 Canadian dollar for 1 American dollar. Would the following
events cause pressure on the Canadian dollar to Appreciate or Depreciate?
An increase in the price level in the U.S. ____________
Question 27: (1 point)
Fill in the blanks:
Assume the exchange rate was fixed at 1 Canadian dollar for 1 American dollar. Would the following
events cause pressure on the Canadian dollar to Appreciate or Depreciate?
An increase in the price level in Canada ____________
Question 28: (1 point)
Fill in the blanks:
Assume the exchange rate was fixed at 1 Canadian dollar for 1 American dollar. Would the following
events cause pressure on the Canadian dollar to Appreciate or Depreciate?
Many Canadians plan to vacation in Florida for the winter ____________
Question 29: (5 points)
Using the following table, calculate the missing exchange rates:
Country
Currency
Price of one unit of foreign currency in
Canadian dollars
U.S.A.
Britain
France
Japan
Mexico
Dollar
Pound
Euro
Yen
Peso
1.37
____________
0.25
____________
0.019
Price of one Canadian
dollar in terms of foreign
currency
____________
0.5125
____________
119.9275
____________
Question 30: (1 point)
Fill in the blanks:
Foreign direct investment in Canada increases Capital account receipt/Capital account payment/
Current account payment/ Current account receipt
Question 31: (1 point)
Fill in the blanks:
Direct investment abroad by Canadians during the year increases Capital account receipt/Capital
account payment/ Current account payment/ Current account receipt
Question 32: (1 point)
Fill in the blanks:
Expenditures in Canada by American tourists increases Capital account receipt/Capital account
payment/ Current account payment/ Current account receipt
Question 33: (1 point)
Fill in the blanks:
Interest and dividends received by foreigners on their holdings of Canadian bonds and stocks increases
Capital account receipt/Capital account payment/ Current account payment/ Current account
receipt
Question 34: (1 point)
Fill in the blanks:
Interest and dividends paid to Canadians by foreigners increases Capital account receipt/Capital account
payment/ Current account payment/ Current account receipt
Question 35: (1 point)
Fill in the blanks:
Shipments of non-monetary gold abroad Capital account receipt/Capital account payment/ Current
account payment/ Current account receipt
Question 36: (1 point)
Fill in the blanks:
Canadian imports are what type of item? __Debit or Credit__
Question 37: (1 point)
Fill in the blanks:
A transaction that typically leads to the sale of foreign currency is recorded as a? Debit or Credit
Question 38: (1 point)
Fill in the blanks:
A transaction that typically leads to the purchase of foreign currency is recorded as a? Debit or Credit
Question 39: (1 point)
Fill in the blanks:
The record of transactions between a nation and foreign countries is called its? Terms of trade or Balance
of payment
Question 40: (1 point)
Fill in the blanks:
Corporate tax cuts in Canada raise expected after-tax, investment returns in Canada rise relative to those in
Europe
Canadian Dollar appreciated, the Euro depreciates/
Gains from trade/
Balance of payment deficit/
or A trade deficit occurs
Question 41: (1 point)
Fill in the blanks:
Current account
Exchange rates between two nations adjusts to reflect the price level differences between the
countries/
Includes flow of payments from the purchase or sale of real or financial assets/
Balance of payment deficit/
or Summarizes Canada’s trade in currently produced goods and services
Question 42: (1 point)
Fill in the blanks:
Appreciation of Canadian dollar
Canadian dollar buys a large amount of the foreign currency/
Floating exchange rate/
Dollar buys a smaller amount of the foreign currency/
or The rate at which units of one product can be exchanged for units of another product