ECON105 second%20exam

# ECON105 second%20exam - Eldar sehic sFU 2009-3 EcoNt0s...

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Eldar sehic sFU 2009-3 EcoNt0s second exam (page I of 5) ID: LAST NAITE: Dt __ fuIARK: 10 QUESTTONS, 3 MARKS EACH (1) Suppose the central bank creates 5200 of new money, white the target reserye ratio is 5% and the cash drain is 20%. (a) What witt be the change in the [eve[ of money suppty? (Wogz ittt\5:: A fiS = {*,){* *',',*n;Y) a,&.rs = (,*-,-) {t"*) =(it xt""l - (k ) (r.- ) : },cc ( Crt.a c.tc-,4'TZ t,tt tY qt,7- rl 4.-fo;-i,\e-i; ) (b) What witt be the change in the levet of total cash? C ffiI : t6,y*qi itv C*it.{ e Cr+*rafl rK C/t-s.l il-{z-*7 :l 1 Btl t,r9 ire L-t ,}-t / e,.rt.A t( . - r:-iu\,+ no?J *trf k:ia't.,,aa-SI (2) Economy is currently in an inftationary gap. *('.'tr"){tu")::: 2+e (a) Give a long-run policy sotution (fiscat or monetary). Show what happens using an OUTpUT graph. L"'(n \ *) tft {rin i\r Lf) .e K- jr t C"-tf ( .a o"t. *se) tbt Give one advantagg qld one disadvantageof the tong-run sotution you provided in part (a). ----*---Er-*-,---- tt{T &{ J'.4 L,i-s (+rt Li,- i- ---- ,t'D, rl n:>a .lk't tr

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/ Eldar Sehic SFU 2009-3 ECON105 second exam (page 2 of 5) (3) Economy is initiatty at potential,. Then the government decides to decrease its spenOing. (a) What happens to the budget deficit immediately? \A ^l t €.
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