代写ECO 202 (Section: LEC5101) Test 3代写留学生Matlab语言程序

ECO 202 (Section: LEC5101) Test 3

1. (15 pts) Below shows a hypothetical bank’s balance sheet:

Currently, the bank must maintain a reserve ratio of 5%.

(a) (2 pts) Find the value of loans, x, under the column A.

(b) (3 pts) What is this bank’s capital to asset ratio and reserve ratio?

(c) (2 pts) Does the bank meet the capital requirement?

(d) (4 pts) After a reform. in banking regulation, the bank is now required to meet a capital to asset ratio of 20% instead of the 5% reserve ratio. Does the bank meet his requirement? If so, what is the amount of excess capital held by the bank? If not, how much does the bank needs to augment its net worth by injecting more cash?

(e) (4 pts) Calculate the leverage ratio. How much does the bank earn in term of percentage gain in net worth if the investment increase to 4200.

2. (15 pts) This question focuses on the IS model from Chapter 11. In a closed economy, the consumption (Ct), investment (It), and govern-ment purchases (Gt) are represented by the following equations:

The C and G equations are the same as in the simple IS model, while the I equation includes an extension ¯xYet to capture the observation that more cash flow during an economic boom, leading to increased investment.

(a) (2 pts) What is the expected range of the parameter ¯x?

(b) (3 pts) Economists attribute the cost disadvantage of invest-ment using financing (i.e., borrowing) over cash flow to agency problems. List two types of agency problems and provide a brief explanation for each, using one to two sentences for each expla-nation.

(c) (4 pts) Derive the IS curve. Must show all the important steps.

(d) (3 pts) The economy is facing a recession where Ye = −10%. The government decided to implement a discretionary policy to boost the economy. By how much does the government need to change the ¯aG parameter? Show it with any relevant parameters.

(e) (3 pts) Does the government need to spend more than the de-crease in output? Provide the intuition behind your answer with 3-4 sentences.

3. (10 pts) This question focus on the AS/AD model.

Suppose that the aerospace industry develops a hydrogen-powered aeroplane, enabling ultra-low operating costs. This innovation leads to a one-time decrease in prices for the entire economy (i.e., ¯o < 0) for a single period, because of the reduced transportation costs to deliver around the globe.

At the same time, household and firms are permissive about the future. These expectation shocks will persist until another exogenous change occurs. Assuming that the economy is initially in the steady state (i.e., π0 = ¯π and Yet = 0), answer the following questions using the AS/AD framework, specifying which parameters are changing.

(a) (2 pts) Calculate the π1, the inflation right after the initial im-pact. Is π1 greater than π0?

(b) (2 pts) Calculate the π2, the inflation as the economy is adjusting after the initial impact. Is π2 greater than π1?

(c) (3 pts) Determine the initial impact of new invention on inflation and the output gap. Assume the impact on short-run output from AD is larger than that from the AS. Draw a graph to illustrate it (label all the axis and key points).

(d) (3 pts) Determine the overall impact of new invention on infla-tion and the output gap. Draw a graph to illustrate it (label all the axis and key points).

4. (10 pts) As a policy advisor to the central bank with the objective of stabilizing inflation and economic activity, what would be your re-sponses to the following independent events?

(a) (5 pts) Demand for Canadian lumber in the Japanese market has experienced a significant decline.

(b) (5 pts) The government introduces a universal income program, which transfer money to every individual in the economy. This initiative is projected to incur higher government spending com-pared to all previous welfare programs combined. Assume no tax increase in the future.