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1.

1. Explain the three key functions of the Bank of Canada
2. In the Canadian banking system, the target reserve ratio is 20per cent and the estimated value of the cash drain ratio is 5 percent. What is the total value of new deposits from a new deposit ina bank of $500.00? (show your calculations).

2

1. Explain the three basic functions of money.
2. Briefly explain how the bank of Canada could increase spendingin the economy with an increase in the money supply using thereserve ratio requirements.

3

1. What are the two key approaches used in the new economic growththeories to explain why their theories are different from theestablished Neoclassical Growth theory
2. Explain the fundamental determinants of long-term economicgrowth for an economy

4 Consider the Canadian economy that is inlong-run equilibrium with an output equal to Y*. The United Stateseconomy goes into a major slowdown causing a significant decreasein goods and services shipped into the United States from Canada.For Canada, answer the following questions:

1. What kind of shock occurred- aggregate demand or aggregatesupply?
2. Explain how fiscal policies by the government of Canada can beused to drive the economy back towards Y* in the long run. Explainthe steps

5 A review of the economic performance of theCanadian economy by economists at the Bank of Canada suggests thatthe economy has an inflationary output gap.

Explain how the Bank of Canada coulduse monetary policy instruments to close the inflationary outputgap. Explain the process (mechanism) through which this occurs. (20points).