Economists have announced that the country is experiencing an inflationary gap. What economic symptoms or indicators would make the economists draw this conclusion? At this point does AE exceed AO or fall below it?
Name and explain two MONETARY policy tools the Bank of Canada can use to close the gap you identified above.
3. Use the figures in the table below to answer the following questions. $ Billions
Personal savings deposits at chartered banks
215
Currency held outside of chartered banks
80
Non-personal notice deposits at chartered banks
400
Deposits at non-bank deposit taking institutions
200
Money-market mutual funds
75
Life insurance annuities
40
Demand deposits in chartered banks
150
Canada Savings Bonds
5
Non-money-market mutual funds
500
What is the value of M1?
What is the value of M2?
What is the value of M2+?
What is the value of M2++?
4. Answer the following questions using the information below. Assume the desired reserve ratio is 33%.
Balance Sheet Chartered Bank AAA
Assets
Liabilities
Reserves
$60000
Demand Deposits
$150000
Loans
60000
Capital Stock
300000
Securities
40000Property
290000Total Assets
450000
Total Liabilities
450000
a) What is the dollar amount of excess reserves?
b) By what dollar amount can this bank safely expand its loans?
c) By expanding its loans by the amount in part (b) what would its demand deposits equal (if all loans were made to customers holding demand deposits)?
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