Canada has a fractional reserve bank system, the reserve requirement is 25% and the bank in canada holds no excess reserves.
Susy deposits 100k in the bank A with no equity
What is the max loan the bank could make
What is the max possible change in demand
Max possible change in money supply, <> = demand and explain
At a 25,000 worth security equity exists leverage ratio
One good
Ice cream
Y = 800
V is constant
2014 at $5 = 4,000
Fed raises money supply in the future (2015)
The price then is 10 per carton and the fed increases the money supply by 10%
According to the fisher affect what happened to the real interest rate, nominal, in 2015
Compute inflation rate from 2014 to 2015 and use monetary neutrality
Sketch a graph for both 2014 and 2015
Illustrate initial equilibrium
A inflation rate went up 6.8%
Two policies the gov could implement
What happened to the price level employment real gdp
What happened to short run and long run as a result
B CPI went up 6.8, so the federal reserve wondered how they could help
What happened to the price level employment real gdp
What happened to short run and long run as a result
Y=c+i+g
C=200+.75(y-t)
I=1000-100r
G=250
T=200
GDP is 4000 at natural rate
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Interest rate is 8% solve for gdp
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No change in monetary policy, how can the gov restore employment in two different ways
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No change in fiscal policy, change in interest, what would restore employment and what would happen to aggregate demand
Spending multiplier is equal to intercept mean. Assume the government spending goes up by 10,000,000
How much initially spent
Y=c+i+g
C 100 +75 (y-t)
i=500-50y
G=725
T=100
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