MAKE-UP ASSIGNMENT FOR QUIZ 1
1. Indicate whether the following statements are true or false and briefly explain your answer.
a. Actions by government to increase spending and by the central bank to increase the money supply will cause interest rates and GDP to rise.
b. Policies which reduce energy supplies and/or raise their production costs will cause the aggregate price level to rise, national output to decrease and unemployment to rise.
c. If chartered banks invest their excess reserves in assets other than loans, the money supply will decline.
2. Indicate how each of the listed variables(GDP, consumption and interest rates change in each of the following separate events. Briefly explain.
a. The recent strengthening of the Canadian dollar causes exports to decline and imports to rise.
b. Provincial and the federal governments in upcoming budgets restrain spending and/or raise taxes in order to move back to fiscal balance
c. The Bank of Canada has moderately tightens monetary policy in the next twelve months.
The variables are Canadian GDP, interest rate, and consumption