Macroeconomics Answers

Articulate how corporate/company law and governance mechanisms facilitate economic activity and how they respond

 Illustrate in a supply/demand diagram, by shifting the demand curve appropriately, the effect on the demand for flights between Calgary and Winnipeg as a result of: (a) Substantial increase in government taxes for use of airports. (b) Substantial increase in the populations of both Calgary and Winnipeg. (c) The closure of an important land route from Calgary to Winnipeg. (d) Substantial increase in the price of flight tickets.

1. One of the most difficult tasks in regression analysis is to obtain the data suitable for quan-

titative studies of this kind. Suppose you are trying to estimate the demand for home fur-

niture. Suggest the kinds of variables that could be used to represent the following factors,

which are believed to affect the demand for any product. Be as specific as possible about

how the variables are going to be measured. Do you anticipate any difficulty in securing

such data? Explain.

Determinants of Demand

for Furniture

Suggested Variables to

Use in Regression Analysis

Price

Tastes and preferences

Price of related products

Income

Cost or availability of credit

Number of buyers

Future expectations

Other possible factors

5. Discuss some of the important criticisms of the forecasting ability of the leading economic

indicators.

2. Enumerate methods of qualitative and quantitative forecasting. What are the major differ-

ences between the two?

1. Explain the difference between time series data and cross-sectional data. Provide examples

of each type of data.

The government is considering raising the tax rate on labor income and asks you to report on the supply-side effects of such an action.

Use appropriate graphs and report directions of change, not exact magnitudes. What will happen to:

1. The supply of labor
2. The demand for labor and why?
3. Equilibrium employment and why?
4. The equilibrium before-tax wage rate and why?
5. The equilibrium after-tax wage and why?
6. Potential GDP?

In the economy of Nocoin, Bank deposits are $300 billion, bank reserves are $15 billion of which two-thirds are deposits with the central bank. Households and firms hold $30 billion in bank notes. There are no coins. Calculate:

1. The monetary base and quantity of money.
2. The banks’ desired reserve ratio and the currency drain ratio (as percentage).

Canada produces natural resources (coal, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand.

1. Explain how growth in the demand for Canada’s natural resources would affect the demand for Canadian dollars in the foreign exchange market.
2. Explain how the supply of Canadian dollars would change.
3. Explain how the value of the Canadian dollar would change.
4. Illustrate your answer with a graphical analysis.

Suppose that yesterday the Canadian dollar was trading on the foreign exchange market at 0.75 euros per Canadian dollar and today the Canadian dollar is trading at 0.80 euros per Canadian dollar. Which of the two currencies (the Canadian dollar or the euro) has appreciated and which has depreciated today?