8 million c 10 million d 12 million e 20 million 4

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8 million; c) $10 million; d) $12 million; e) $20 million. 4. Explain whether the following statements are True, False or Uncertain. (a) If the nominal interest rate is zero, the real interest rate is also zero. (b) Workers and firms agree to a contract which increases wages by 3%, under the assumption the inflation rate will be zero. If the actual inflation rate turns out to be 3%, workers lose and firms gain. (c) Assume that the target reserve ratio for bans is 5%. If (1) the Bank of Canada sells $1,000 worth of bonds to the public and (2) a rich individual deposits in a bank the $1,000 in cash that she kept under the bed, the money supply will fall by $19,000. 5. Because of the recession, the unemployment rate in Canada rises to 9% and exceeds the natural rate of unemployment (full employment). (a) What is the natural rate of unemployment? Is it zero? Explain. (b) The central bank, to combat the recession, buys government bonds in the open market. Explain what happens to: (i) bank reserves (ii) the demand for money (iii) the level of imports
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Christopher Reinemann
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