Question 1

Special Purchase and Resale Agreements ________.

Accepted Answer

A)  relieve undesired upward pressure on the overnight interest rate 
B)  alleviate undesired downward pressure on the overnight financing rate 
C)  relieve undesired downward pressure on the overnight interest rate 
D)  alleviate undesired volatility in the overnight financing rate 
A)  relieve undesired upward pressure on the overnight interest rate 
B)  alleviate undesired downward pressure on the overnight financing rate 
C)  relieve undesired downward pressure on the overnight interest rate 
D)  alleviate undesired volatility in the overnight financing rate

Question 2

If the operating band for the overnight interest rate is from 3.5 to 4.0 percent, then ________.

Accepted Answer

A)  the bank rate is 4.0 percent 
B)  the bank rate is the lower limit of the operating band 
C)  the bank rate is the rate the Bank of Canada charges LVTS participants with negative settlement balances at the end of the banking day 
D)  A and C only. 
A)  the bank rate is 4.0 percent 
B)  the bank rate is the lower limit of the operating band 
C)  the bank rate is the rate the Bank of Canada charges LVTS participants with negative settlement balances at the end of the banking day 
D)  A and C only.

Question 3

The Bank of Canada will engage in a repurchase and resale agreement when it wants to ________ reserves ________ in the banking system.

Accepted Answer

A)  increase; permanently 
B)  increase; temporarily 
C)  decrease; temporarily 
D)  decrease; permanently 
A)  increase; permanently 
B)  increase; temporarily 
C)  decrease; temporarily 
D)  decrease; permanently

Question 4

The purchase of financial assets by the central bank through the creation of excess reserves for banks is known as ________.

Accepted Answer

A)  quantitative easing 
B)  conditional statements about the future path of the policy rate 
C)  interest rate expectations 
D)  credit easing 
A)  quantitative easing 
B)  conditional statements about the future path of the policy rate 
C)  interest rate expectations 
D)  credit easing

Question 5

What is the operating band for the overnight interest rate?

Accepted Answer

The Bank of Canada implements monetary p

Question 6

Where only the net credit or debit position of each participant vis-à-vis all other participants is calculated is known as ________.

Accepted Answer

A)  multilateral netting 
B)  principal-agent netting 
C)  moral hazard netting 
D)  credit risk netting 
A)  multilateral netting 
B)  principal-agent netting 
C)  moral hazard netting 
D)  credit risk netting

Question 7

One of the Bank of Canada's most important roles is to be ________.

Accepted Answer

A)  the Federal government's banker 
B)  the issuer of government debt 
C)  a lender-of-last-resort 
D)  a regulator of banks 
A)  the Federal government's banker 
B)  the issuer of government debt 
C)  a lender-of-last-resort 
D)  a regulator of banks

Question 8

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________.

Accepted Answer

A)  3.75 percent 
B)  4 percent 
C)  3.25 percent 
D)  3 percent 
A)  3.75 percent 
B)  4 percent 
C)  3.25 percent 
D)  3 percent

Question 9

Changes to the operating band are announced by the Bank of Canada ________ times a year.

Accepted Answer

A)  eight 
B)  six 
C)  four 
D)  two 
A)  eight 
B)  six 
C)  four 
D)  two

Question 10

It is the ________ assumption of ________ that allows for the transmission between nominal and real interest rates.

Accepted Answer

A)  new Keynesian; sticky prices 
B)  monetarist; sticky prices 
C)  new Keynesian; perfect markets 
D)  Bank of Canada; chartered banks allegiance to Canadian monetary policy 
A)  new Keynesian; sticky prices 
B)  monetarist; sticky prices 
C)  new Keynesian; perfect markets 
D)  Bank of Canada; chartered banks allegiance to Canadian monetary policy

Question 11

The interest rate on loans of reserves from one bank to another is ________.

Accepted Answer

A)  the bank rate 
B)  the fed funds rate 
C)  the discount rate 
D)  the overnight rate 
A)  the bank rate 
B)  the fed funds rate 
C)  the discount rate 
D)  the overnight rate

Question 12

The overnight market in Canada is ________ with a ________ range of participants.

Accepted Answer

A)  very liquid; broad 
B)  very liquid; narrow 
C)  not very liquid; broad 
D)  not very liquid; narrow 
A)  very liquid; broad 
B)  very liquid; narrow 
C)  not very liquid; broad 
D)  not very liquid; narrow

Question 13

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________ and the bank rate is ________.

Accepted Answer

A)  3.75 percent; 4 percent 
B)  4 percent; 4.25 percent 
C)  3.25 percent; 3.5 percent 
D)  3 percent; 3.25 
A)  3.75 percent; 4 percent 
B)  4 percent; 4.25 percent 
C)  3.25 percent; 3.5 percent 
D)  3 percent; 3.25

Question 14

In the market for reserves, market equilibrium occurs where the ________.

Accepted Answer

A)  quantity of reserves demanded equals the quantity supplied 
B)  quantity of reserves demanded is above the quantity supplied 
C)  quantity of reserves demanded is below the quantity supplied 
D)  quantity of reserves demanded does not equal the quantity supplied 
A)  quantity of reserves demanded equals the quantity supplied 
B)  quantity of reserves demanded is above the quantity supplied 
C)  quantity of reserves demanded is below the quantity supplied 
D)  quantity of reserves demanded does not equal the quantity supplied

Question 15

If the Bank of Canada wants to alleviate undesired downward pressure on the overnight financing rate it will enter into a ________.

Accepted Answer

A)  Purchase and Resale Agreement 
B)  Repurchase Agreement 
C)  Swap 
D)  Reverse Repo 
A)  Purchase and Resale Agreement 
B)  Repurchase Agreement 
C)  Swap 
D)  Reverse Repo

Question 16

The Federal Reserve's lending of reserves to banks is called ________ lending.

Accepted Answer

A)  discount window 
B)  term 
C)  prime 
D)  target 
A)  discount window 
B)  term 
C)  prime 
D)  target

Question 17

The Bank of Canada most common operations have been repurchase transactions with ________.

Accepted Answer

A)  stockbrokers 
B)  primary dealers 
C)  the public 
D)  other central banks 
A)  stockbrokers 
B)  primary dealers 
C)  the public 
D)  other central banks

Question 18

If the Bank of Canada wants to temporarily inject reserves in the banking system, it will engage in ________.

Accepted Answer

A)  a repurchase agreement 
B)  a "swap" transaction 
C)  a reverse repurchase agreement 
D)  None of the above. 
A)  a repurchase agreement 
B)  a "swap" transaction 
C)  a reverse repurchase agreement 
D)  None of the above.

Question 19

The Bank of Canada commitments regarding the operating band for the overnight interest rate to align market expectations of future short-term interest rates with those of the Bank are known as ________.

Accepted Answer

A)  quantitative easing 
B)  conditional statements about the future path of the policy rate 
C)  interest rate expectations 
D)  credit easing 
A)  quantitative easing 
B)  conditional statements about the future path of the policy rate 
C)  interest rate expectations 
D)  credit easing

Question 20

The primary indicator of the Bank of Canada's stance on monetary policy is ________.

Accepted Answer

A)  the bank rate 
B)  the overnight rate 
C)  the growth rate of the monetary base 
D)  the growth rate of M2 
A)  the bank rate 
B)  the overnight rate 
C)  the growth rate of the monetary base 
D)  the growth rate of M2

Exam 16: Tools of Monetary Policy

Special Purchase and Resale Agreements ________.

If the operating band for the overnight interest rate is from 3.5 to 4.0 percent, then ________.

The Bank of Canada will engage in a repurchase and resale agreement when it wants to ________ reserves ________ in the banking system.

The purchase of financial assets by the central bank through the creation of excess reserves for banks is known as ________.

What is the operating band for the overnight interest rate?

Where only the net credit or debit position of each participant vis-à-vis all other participants is calculated is known as ________.

One of the Bank of Canada's most important roles is to be ________.

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________.

Changes to the operating band are announced by the Bank of Canada ________ times a year.

It is the ________ assumption of ________ that allows for the transmission between nominal and real interest rates.

The interest rate on loans of reserves from one bank to another is ________.

The overnight market in Canada is ________ with a ________ range of participants.

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________ and the bank rate is ________.

In the market for reserves, market equilibrium occurs where the ________.

If the Bank of Canada wants to alleviate undesired downward pressure on the overnight financing rate it will enter into a ________.

The Federal Reserve's lending of reserves to banks is called ________ lending.

The Bank of Canada most common operations have been repurchase transactions with ________.

If the Bank of Canada wants to temporarily inject reserves in the banking system, it will engage in ________.

The Bank of Canada commitments regarding the operating band for the overnight interest rate to align market expectations of future short-term interest rates with those of the Bank are known as ________.

The primary indicator of the Bank of Canada's stance on monetary policy is ________.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Filters

The Bank of Canada will engage in a repurchase and resale agreement when it wants to reserves in the banking system.

It is the assumption of that allows for the transmission between nominal and real interest rates.

The overnight market in Canada is with a range of participants.

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is and the bank rate is .