Macroeconomics 212

The correct answer is "a means of payment." This is because money serves as a medium of exchange for goods and services, allowing individuals to make transactions and settle debts. It can be in the form of currency, credit cards, or debit cards, making it a versatile tool for facilitating payments. Money is not necessarily equivalent to barter, gold, or limited to coins, but rather encompasses various forms that enable individuals to conduct financial transactions.

Without money as a medium of exchange, people would have to rely on barter exchange, which can be more complicated and time-consuming. This would result in increased transaction costs, as individuals would need to find someone who wants what they have and has what they want. As a result, some trades may not take place due to the difficulties and inefficiencies of barter exchange. Therefore, the increased transaction costs associated with trading would prohibit some trades from taking place.

When a government has a budget surplus, it means that it is spending less than it is collecting in revenue. This surplus can be used to finance investment, such as infrastructure projects or research and development, which can stimulate economic growth. By investing in these projects, the government is able to support and promote economic development. Therefore, the correct answer is that a budget surplus helps finance investment.

A decrease in the government budget deficit means that the government is spending less than it is receiving in revenue. This leads to a decrease in the demand for loanable funds because the government is borrowing less money. On the other hand, an increase in the government budget surplus means that the government is spending less than it is receiving in revenue. This leads to an increase in the supply of loanable funds because the government has more money available to lend. Therefore, a decrease in the government budget deficit decreases the demand for loanable funds and an increase in the government budget surplus increases the supply of loanable funds.

The correct answer is "Bank of Canada notes held outside the Bank of Canada, bank deposits at the Bank of Canada, and coins held by banks and the public." This is because the Monetary Base includes the currency held by the public, which includes bank notes held outside the Bank of Canada and coins held by banks and the public. It also includes bank deposits at the Bank of Canada, which are reserves held by the banks.

If the demand for dollars temporarily decreases, the Bank of Canada can maintain the target exchange rate by buying dollars. By purchasing dollars, the Bank increases the demand for dollars and helps to stabilize the exchange rate at the fixed rate of 0.50 U.K. pounds per Canadian dollar. This action prevents the Canadian dollar from depreciating and maintains the desired exchange rate.

An increase in the government budget deficit leads to an increase in the country's demand for loanable funds, as the government needs to borrow more money to cover the deficit. This increase in demand for loanable funds also leads to an increase in foreign borrowing, as the government may need to borrow from international lenders to meet its funding needs. At the same time, the increase in the government budget deficit decreases foreign lending, as the country is relying more on borrowing rather than lending to other countries.

If a very small country is a net foreign lender and its supply of loanable funds increases, it means that the country has more funds available to lend to other countries. However, since it is a very small country, the increase in supply is not significant enough to affect the equilibrium quantity of loanable funds used in the country. Therefore, the equilibrium quantity of loanable funds used in the country does not change. On the other hand, the country's foreign lending increases because it now has more funds available to lend to other countries.

When a very small country is a net foreign borrower and its demand for loanable funds increases, the equilibrium quantity of loanable funds used in the country increases. This is because the country's increased demand for loanable funds leads to an increase in the quantity of funds borrowed from foreign sources. Therefore, both the equilibrium quantity of loanable funds used in the country and the country's foreign borrowing increase.

The reserve ratio of a depository institution is the ratio of a bank's total reserves that are held in its vault or on deposit with the Bank of Canada to total deposits. This means that the reserve ratio represents the portion of a bank's reserves that are physically held by the bank or kept in an account with the central bank. It is an important measure as it determines the amount of funds that a bank must keep on hand to meet potential withdrawal demands from depositors.

The correct answer is "currency drain ratio." The currency drain ratio refers to the ratio of currency held by the public to total deposits in the banking system. It measures the extent to which individuals and businesses prefer to hold currency rather than deposit it in banks. A higher currency drain ratio indicates a higher preference for holding cash, which can have implications for the effectiveness of monetary policy and the overall liquidity of the banking system.

If both the current account and the capital account are in deficit, it means that the country is experiencing a negative balance of trade and a negative balance of capital flows. This implies that the country is spending more on imports and foreign investments than it is earning from exports and foreign investments. As a result, the official settlements account balance will be positive, indicating that the country is borrowing or receiving funds from abroad to cover the deficit.

Pooling risk is an economic function of a chartered bank because it involves the bank collecting funds from multiple individuals or businesses and using those funds to provide financial services such as loans, investments, and insurance. By pooling the funds together, the bank is able to spread the risk across a larger group of people or businesses, reducing the impact of any individual's financial difficulties. This helps to stabilize the economy and promote economic growth. Issuing bank notes, supervising financial markets, and conducting monetary policy are also functions of a chartered bank, but in this case, pooling risk is the correct answer.