Question Details

How would you calculate what must be the Canadian interest rate 


1. How could a reduction in inventories slice the GDP growth number. 83 

a)	The GDP growth number referred to here must be growth in aggregate demand 
b)	Actual GDP growth must have been 5.7 percent 
c)	Actual GDP growth must have been 1.1 percent 
d)	The GDP growth number must include the 1.8 percent price increases 

2. “A major revision to last year- inflation numbers yesterday indicated that U.S. inflation had actually been running a half-percentage point higher than the market had previously assumed. This implies that in real terms the Fed- benchmark federal funds interest rate is considerably more accommodative than the Fed had thought. This foretells …” The best way to complete this clip is 
a) interest rate increases 
b) interest rate decreases 
c) money supply increases but no interest rate change 
d) money supply decreases but no interest rate change 
3. “The revision to inflation numbers indicating that inflation has actually been running a half-percentage point higher than the market had thought stirred things up for long-term bonds.” What kind of stirring up happened on the bond market? The price of long-term bonds 
a) fell slightly b) fell a lot c) rose slightly d) rose a lot 
4. “Currently, the spread between long-term rates and inflation is above average, implying that investors believe that ……..” The best way to complete this statement is 
	inflation will be higher in the future 
	inflation will be lower in the future 
	the Fed will soon lower interest rates 
	taxes will increase in the future 

5. “Canada- interest rates are too low to bring inflation under control. The interest rate that matters for fighting inflation is ….. The contrast between Canada and other countries is revealing. The U.S. has a federal funds rate of 5.25% and inflation of 2.4%; the UK has a bank rate of 5.75 and inflation of 2%; and Australia has its overnight rate at 6.5% and inflation of 2.1%.” How would you calculate what must be the Canadian interest rate being referred to here? 
	the difference between the nominal interest rate and the inflation rate 
	the Canadian equivalent of the federal funds rate 
	some measure of the real interest rate 
	both a) and c) above 


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