Fiscal Policy Tax Rate and Nation Economy Questions 1)Fiscal policy is how a government adjusts its spending levels and tax rates to monitor and influence

Fiscal Policy Tax Rate and Nation Economy Questions 1)Fiscal policy is how a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy. Please discuss.2)Please discuss how a short-term decline in world energy prices would influence the Canadian economy.3)Please discuss how money is “created” and what role the banking system plays in moneycreation. SHORT ANSWER QUESTIONS PART 1. Please answer 6 of the following 9 questions. (Each
question is worth 10 points – Approx. 150 words each.)
1) Fiscal policy is how a government adjusts its spending levels and tax rates to monitor and
influence a nation’s economy. Please discuss.
2) Please discuss how a short-term decline in world energy prices would influence the Canadian
economy.
3) Please discuss how money is “created” and what role the banking system plays in money
creation.
4) Please discuss the challenges associated with measuring unemployment? Is it a good
measure of a country’s economy?
5) Please discuss the “problem” with inflation? Why do many economists warn against high
levels of inflation?
6) Please discuss the concept of “economic inequality”.
7) Please discuss the role that information and innovation play in the networked global
economy.
8) Please discuss the concept of a “Business cycle”.
9) Please discuss the concept of “Monetary policy”.
SHORT ANSWER QUESTIONS PART 2 Explain/discuss any 2 of the following concepts. (Each
answer is worth 5 marks – Approx. 100 words each.)
A. Central Bank
B. Money Market
C. Purchasing-power parity
D. Real and nominal exchange rates
E. Aggregate-supply curve
ESSAY QUESTIONS. Please answers 2 of the following 3 questions. (Each question is worth 25
marks – Approx. 300-400 words.)
1) Please discuss the following excerpt from a recent CBCNews article. Canada’s economy
cranked out an impressive 41,000 jobs last month, more than four times what economists were
expecting. Statistics Canada’s Labour Force Survey showed there were more people employed
in Alberta, Manitoba, Nova Scotia and Saskatchewan. At the same time, employment declined
in Prince Edward Island and was little changed in the other provinces. Alberta added almost
19,000 jobs during the month, a reversal of a recent trend, and enough to drag the jobless rate
down eight points to the national average again. The province still, however, has fewer people
employed today than it did a year ago. By sector, health care was a real winner, with 25,000
new jobs. Manufacturing, which has been showing some encouraging economic signs in recent
months, lost 32,000 positions. “This sector had been a rare bright spot until March, and raises
some doubts on just how much this sector is truly turning around,” BMO economist Doug
Porter noted. The natural resources sector, which includes mining, oil and gas, lost about 2,100
jobs. Economists polled by Bloomberg had been expecting the Canadian economy to add about
10,000 jobs in March. The surprise good news pushed the Canadian dollar up half a cent to
76.87 cents US. The strong showing was enough to pull the unemployment rate down by 0.2
percentage points to 7.1 per cent. “The composition of the increase was also extremely
encouraging,” CIBC economist Nick Exarhos said. “Most of the increase was driven by full-time
positions, up 35,000.”
2) Please discuss and illustrate how policy makers might influence both the supply side of the
economy as well as the demand side. Why might policy makers want to do this? You will want
to include a discussion on both fiscal and monetary policy options.
3) Please discuss the following excerpt from a recent CBCNews article. The Bank of Canada sent
a strong signal today that it is content to allow the weak Canadian dollar to stay low. Bank
governor Stephen Poloz says he won’t try to match recent interest rate increases in the U.S.,
but will “continue to run an independent monetary policy, anchored by our inflation target of
two per cent.” Canada twice cut its benchmark interest rate in 2015 in an attempt to stimulate
the economy. The U.S., meanwhile, finally hiked its rate in December after six years at record
lows. Normally, the two countries have monetary policies that move in broadly similar
directions. But the U.S. hiking of rate as Canada cuts them — a phenomenon known as
“divergence” — could have unexpected consequences, especially for the loonie which lost 16
per cent of its value last year while the two central banks were moving in opposite direction. In
a speech at Ottawa City Hall, Poloz explained that the weak loonie is the result of weak prices
for Canada’s commodities, particularly oil. “It is not a coincidence that the Canadian dollar is
about where it was back in 2003 and 2004,” Poloz said. “Oil prices are also about where they
were back then. “The depreciation of our currency is a natural part of the process.” Following
the speech, he bristled at the suggestion during a media Q&A that he was “cheerleading” the
loonie’s decline. “It’s not something to cheer for,” he said. “We would of course prefer oil prices
to be a little higher.” Poloz explained that because Canada is a net exporter of commodities,
while the U.S. is a net importer, the impact on the terms of trade for the two economies has
been different. He said that fact suggests the divergence between U.S. and Canadian monetary
policies will continue, and the loonie is likely to stay low for the foreseeable future.

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