ECON385V5 Economics Assignment

ECON385V5 Economics Assignment

ECON385V5 Economics Assignment

1.How many ratios of exchange would an individual have to cope with in a barter economy with 276 different items available for exchange? How many absolute prices would there be if one of the items available for exchange were used as a generally acceptable medium of exchange? Explain how the use of money as a unit of account can help reduce transaction costs in this economy.

2.The Bank of Canada defines the Canadian money supply in terms of M1+, M1++, M2, M2+, M2++, and M3 monetary aggregates.
What financial assets are included in each of these six aggregates?
How does each aggregate satisfy the functions generally attributed to money?
Are there any characteristics (other than those of money’s functions) that should be considered in the definition of money?

3.Suppose you just deposited $14,000 in your bank savings account. The current real interest rate is 3%, and inflation is expected to be 2.5% over the next year.
What nominal interest rate would you require from the bank over the next year?
How much money will you have at the end of one year?
If you are saving to buy a car that currently sells for $14,900, will you have enough to buy it?

4.The demand curve and supply curve for one-year discount bonds with a face value of $1000 are as follows, respectively.

Bd: P = 1200 – 0.5 Q
Bs: P = 400 + 0.3 Q
Where P = price and Q = quantity.
a.What is the expected equilibrium price and quantity of bonds in this market?
b.Given your answer to part (a), what is the expected interest rate in this market?

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