Exam 15: A: Interest Rates and Monetary Policy

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Identify two key tools of monetary policy.

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Other things being equal, what effect will each of the following have on the equilibrium rate of interest? (a) an increase in the money supply; (b) an increase in nominal GDP; (c) a decrease in the money supply; (d) a leftward shift of the asset demand for money.

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Explain what is meant by cyclical asymmetry with regard to monetary policy effects.

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What key target has become the recent focus of monetary policy?

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How does monetary policy affect equilibrium GDP? How can it address the problem of recession or slow growth? Inflation?

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Both the Bank of Canada and chartered banks buy and sell government securities, but for substantially different reasons.Explain.

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What are the two strengths that monetary policy has over fiscal policy?

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