Transcript Macro Questions for Review: problems done in labs for your examination.

• Macro Questions for Review:
• Note: Please make sure you review all of the concepts and
problems done in labs for your examination.
Suppose that the T-account for Bank X is as follows:
Assets
Liabilities
Reserves
$100
Deposits
$500
Loans
$400
Answer the following questions?
• If the Bank of Canada requires banks to hold 5% as reserves, how
much in excess does Bank X now hold?
• Assume that all other banks hold only the required amount of
reserves. If Bank X decides to reduce its reserves to only the
required amount, by how much would the economy’s money supply
increase?
If tax rate is 20% , compute the before-tax real interest rate and
after-tax real interest rate in each of the following cases:
– The nominal interest rate is 10% and inflation rate is 5%
– The nominal interest rate is 6% and the inflation rate is 2%
– Ignoring the tax rate, calculate the real interest rate for (a) and
(b) and explain your answers using the Fisher’s effect
Pat and Kris can brew root beer and make pizza as well.
Hours to produce 1 unit:
Root beer
Pizza
Pat
4
2
Kris
6
4
Using the information, answer the following questions:
• Who has the absolute advantage in making pizza? Who has the
absolute advantage in making root beer?
• Who has the comparative advantage in the production of root beer?
Who has the comparative advantage in making pizza?
• The price of pizza can be expressed in terms of root beer. What is
the highest price at which pizza can be traded that would make both
roommates better off? What is the lowest price?