Reference no: EM13134503

1. Economists have announced that the country is experiencing aninflationary gap. What economic symptoms or indicators would make the economists draw this conclusion? At this point does AE exceed AO or fall below it?

2. 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

a) What is the value of M1?

b) What is the value of M2?

c) What is the value of M2+?

d) 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	$60,000	Demand Deposits	$150,000
Loans	60,000	Capital Stock	300,000
Securities	40,000
Property	290,000
Total Assets	450,000	Total Liabilities	450,000

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)?