The government of Ontario is the largest sub-national borrower in the world, owing a whopping $359 billion as of March 31, 2019. Ontario debt to GDP ratio current stands at 41%. Please review the fiscal policy chapter and try to assess the fiscal policy of the government of Ontario. Include analysis on Ontario's economic situation by listing GDP growth rate, inflation rate, unemployment rate, etc. Try to base your analysis by answering the following questions:

1.The government of Ontario has issued a sizable portion of its debts in foreign currencies. What are advantages and disadvantages of issuing foreign currency debts?

Suppose you are the governor of the Bank of Canada. The economy is experiencing a sharp rise in the inflation rate. What changes would you consider in:

a) Open-market operations

b) The bank rate

c) Explain in each case how the change you advocate would affect chartered bank cash reserves and influence the money supply? Elaborate your ideas with hypothetical examples related to any Canadian charted bank?   

d) Distinguish between the overnight lending rate and the prime interest rate. Why is one higher than the other? Why do changes in the two rates closely track each other? Can we categorize the current monetary policy as an Expansionary Monetary Policy? Why or why not?              

Can Economic Growth Survive Population Decline?

The demographic transition is causing greying populations, shrinking labour forces, and overall population decreases in many nations. Can economic growth survive?

As you know from this chapter, Real GDP = hours of work × labour productivity. The number of hours of work depends heavily, however, on the size of the working-age population. If it begins to shrink, the number of hours of work almost always falls. In such cases, the only way real GDP can rise is if labour productivity increases faster than hours of work decreases. The world is about to see if that can happen in countries that have populations that are greying and shrinking.

The historical background has to do with the fact that as nations industrialize their economies shift from agriculture to industry. As that happens, fertility levels plummet because the shift to modern technology transforms children from being economically essential farm hands who can contribute to their families' incomes from a young age to expensive investment goods that require many years of costly schooling before they can support themselves.

As people react to this change, birthrates tend to fall quite dramatically. The key statistic is the total fertility rate that keeps track of the average number of births that women have during their lifetimes. To keep the population stable in modern societies, the total fertility rate must be about 2.1 births per woman per lifetime (= 1 child to replace mom, 1 child to replace dad, and 0.1 child to compensate for those people who never end up reproducing as adults).

Every rich industrial nation has now seen its total fertility rate drop below the replacement level of 2.1 births per woman per lifetime. In Japan and many Eastern European countries, the number has been so low for so long that there are no longer enough children being born each year to replace the old folks who are dying. As a result, their overall populations are shrinking.

Economists only expect that pattern to become more common and more rapid, so that by the year 2050 the majority of nations will have decreasing populations. But decades before a nation's overall population begins to decrease, it faces a situation in which the labour force shrinks while the elderly population swells.

That pattern is the result of each generation being smaller than the one before. As an example, the Baby Boom generation, born between 1946 and 1964, is much larger than the Baby Bust generation that followed it. So as the Boomers retire over the next two decades, there will be a lot of retirees as compared to working-age adults.

This trend can be quantified by the inverse dependency ratio, which is defined as the number of people of working age (ages 20 to 64) divided by the number of dependents (seniors over age 65 plus youths under age 20). In Canada, the inverse dependency ratio is set to fall from about 1.5 people of working age per dependent in 2010 to just 1.16 people of working age per dependent in 2050. That is extremely problematic because it implies that worker productivity will have to rise dramatically just to make up for the relative decline in the number of workers as compared to dependents. If productivity doesn't keep up with the fall in the inverse dependency ratio, living standards will have to decline because there will simply be too many nonworking consumers relative to working-age producers.

The place where this problem is likely to show up first is Social Security. In 2013, for the first time in Canadian history, the number of retirees outnumbered young people in the 15–24 age group. Statistics Canada projects that the working population will continue to drop while the number of seniors collecting pension is expected to rise. Clearly, worker productivity would have to increase to keep up with the decline in the number of workers relative to retirees.

Economists are uncertain about whether such large productivity increases will be forthcoming. The problem is that consumption competes with investment. A society with a larger fraction of dependents is a society that is likely to devote an increasingly high fraction of total output toward consumption rather than investment. If so, productivity growth may slow considerably.

Another possible problem is that, historically, most transformative new technologies and businesses have been created by energetic young people under the age of 40. With each generation getting smaller, there will be fewer people in that age range and thus, possibly, less innovation and slower productivity growth.

Other economists are more hopeful, however. They view old people as consumers and demanders. As their numbers swell, inventors may simply switch from inventing products for young people to inventing products for old people. If so, productivity growth and living standards could keep on rising at the rates we have come to expect. Moreover, Canada brings in about 250,000 new immigrants each year, which at least partially offsets the lower birth rate.

Question:

Would you expect a country with a total fertility rate of 2.7 to have a growing or a shrinking population over the long run?   

What about a country with a total fertility rate of 1.2?

In 20 years, will Canada have more or fewer workers per retiree than it does today? What are the factors that will determine the size and structure of Canadian population? What is meant by a falling inverse dependency ratio? Why does a falling inverse dependency ratio make it harder for real GDP to continue growing? Suggest some solutions to overcome this problem?                                                                                                                 

Q1a Since Canada has an employment insurance program that provides income for those out of work, why should we worry about unemployment? Do you agree? Explain your ideas with logical examples.

b: Some intellectuals and politicians are of the opinion that the existing employment insurance program can’t protect the economy from the severe effects of natural calamities like COVID- 19. What is your opinion as a student of economics? Justify your opinion with appropriate examples as you have observed all the world in recent days.                                                                                                                                                                                              

Briefly explain why monopolists are neither productively nor allocatively efficient and briefly describe what results from these circumstances.

Write a paper on the coronavirus effects on US: GDP, economic growth, employment, inflation, consumption, investment. What policy can help: fiscal or Monetary or both?

Notes: At least 5 pages, with data and graphs. It is mandatory to do the paper.

Up to 10 points added to final grade.  

1. Imagine that the Canadian economy in 2016 could be described by the following demand determined model:

Consumption: C = a + bYd + θW

Investment: I = I0

Government Purchases: G = G0

Exports: X = X0

Imports: IM = mY

Tax Revenue: T = τ + tY
Where: a is autonomous consumption, b is the marginal propensity to consume out of disposable income, W is wealth, θ is the marginal propensity to consume out of wealth, m is the marginal propensity to import, τ are lump-sum taxes, and t is the tax rate.

(a) Algebraically solve for the equilibrium level of national income, the simple multiplier & draw a diagram of the equilibrium. Make sure to show all your steps, and label all important points on your graph. Total of 7 Marks (5 marks for algebra, 2 marks for graph)

(b) The real value of Canadian households’ principal residence increased three-fold from 1999-2016 and represented about 36% of household assets. Discuss (using the aid of a diagram) what would happen if housing prices fell in this economy. Total of 7 Marks (4 marks for explanation, 3 marks for graph)

For parts (c) and (d), imagine the Canadian economy is characterized by the following parameter values:
Consumption: C = 200 + .75Yd + 0.05W

Investment: I = 350

Government Purchases: G = 75

Exports: X = 125

Imports: IM = 0.2Y

Tax Revenue: T = 100 + 0.1Y

Wealth: W = 1000

The government wants to decrease equilibrium national income by $10 billion using taxation. This model allows two possible tax policies: i. Changes to lump-sum taxes (τ) ii. Changes to the tax-rate (t)

(c) If the government wanted to decrease national equilibrium by $10billion solely through changes to lump-sum taxes(τ), how should they alter their lump-sum taxes? Assume no other changes would take place. Complete answers should include both your calculations and a diagram illustrating what is happening. Total of 7 Marks (2 marks for graph, 5 marks for algebra/explanation)

(d) If the government wanted to decrease national equilibrium by $10billion solely through changes to the proportional tax rate(t), how should they alter their tax rate? Assume no other changes would take place. Complete answers should include both your calculations and a diagram illustrating what is happening. Total of 7 Marks (2 marks for graph, 5 marks for algebra/explanation)

1. What does your own labor supply curve look like? As the rate of your wages changes, what factors affect your willingness to work? What is a backward bending supply curve of labor? Do you think that it probably does exist in the real world? If so, why?

Using the Rybczynski Theorem,

1. If you were a Capital owner, would you support foreign direct investment coming into your country? Why or why not?

2. If you were a worker, would you support immigration policies that increase the number of workers in your country?

According to the Stolper-Samuelson theorem, would you expect capital owners across the globe to favor tariffs given that due to technological advances, production of most goods the world over are capital intensive? Why or why not?

A rm has the following production function:y = L^1/3K^1/2

(a) Does this production function exhibit increasing, decreasing, or constant returns to scale? Prove.

(b) Suppose in the short run, capital is xed at K = 100. Assuming that the output and factor prices are p, w; and r respectively, find firm's factor demand for labor. What will the effects be when w, r and p increase? Explain your results intuitively.

(c) Now, suppose the government decides to impose a payroll tax of $t per worker employed. What will the effect be on L*? Why?

(d) Alternatively, if the government decides to impose a lum-sum tax of $T, what will the e¤ect be on L*? Why?

50) In pricing her line of Smart Phone Cases, Lucie Loo remembers hearing that she needs to consider three decisions with respect to pricing her product line. She seems to remember that one decision is to identify the lowest-priced product and set the price to drive traffic. Another decision she needs to make is to identify the highest priced product and position it as her premium offering. What is the third decision Lucie needs to make?

estimate the total Economic Value (EV) for the complete product line to ensure she makes a profit

set the price differentials for all other products in the line to reflect their perceived value

ensure that the cross elasticity of demand between the products is positive

set the prices for the rest of the line to minimize product cannibalization

determine the break-even quantity for each item so that she knows how much inventory to have on hand for each item