Question 1

Suppose the inflation rate is 2.5 percent,and the output gap is 1 percent.Using the Taylor rule,the Bank of Canada sets the overnight loans rate equal to

Accepted Answer

A) 3 percent. 
B) 3.5 percent. 
C) 5.25 percent. 
D) 5.5 percent. 
E) 5.75 percent. 
A) 3 percent. 
B) 3.5 percent. 
C) 5.25 percent. 
D) 5.5 percent. 
E) 5.75 percent.

Question 2

Which of the following quotations correctly describes the impact of monetary policy on the economy?

Accepted Answer

A) "House sales are down lots, due to the higher money growth." 
B) "The extra money pumped into the economy by the central bank is creating more exports." 
C) "The tightening of money growth is helping sell goods abroad." 
D) "Businesses are investing more, now that monetary policy has become less expansionary." 
E) "The extra money pumped into the economy by the central bank is creating fewer jobs." 
A) "House sales are down lots, due to the higher money growth." 
B) "The extra money pumped into the economy by the central bank is creating more exports." 
C) "The tightening of money growth is helping sell goods abroad." 
D) "Businesses are investing more, now that monetary policy has become less expansionary." 
E) "The extra money pumped into the economy by the central bank is creating fewer jobs."

Question 3

When the Bank of Canada lowers the overnight loans rate,the Canadian dollar ________ on the foreign exchange market and ________.

Accepted Answer

A) falls;aggregate demand decreases 
B) rises;aggregate demand decreases 
C) falls;the increase in imports is greater than the increase in exports 
D) falls;aggregate demand increases 
E) rises;U.S.aggregate demand decreases 
A) falls;aggregate demand decreases 
B) rises;aggregate demand decreases 
C) falls;the increase in imports is greater than the increase in exports 
D) falls;aggregate demand increases 
E) rises;U.S.aggregate demand decreases

Question 4

If the overnight rate is above target,the Bank ________ securities to ________ reserves,which ________ the supply of overnight funds and ________ the overnight rate.

Accepted Answer

A) buys;increase;decreases;raises 
B) sells;increase;increases;lowers 
C) buys;decrease;decreases;raises 
D) sells;decrease;decreases;raises 
E) buys;increase;increases;lowers 
A) buys;increase;decreases;raises 
B) sells;increase;increases;lowers 
C) buys;decrease;decreases;raises 
D) sells;decrease;decreases;raises 
E) buys;increase;increases;lowers

Question 5

The purchase of government bonds by the Bank of Canada

Accepted Answer

A) decreases bank reserves. 
B) increases bank loans. 
C) decreases the price of bonds. 
D) fights inflation. 
E) tightens credit conditions. 
A) decreases bank reserves. 
B) increases bank loans. 
C) decreases the price of bonds. 
D) fights inflation. 
E) tightens credit conditions.

Question 6

How can the Bank of Canada use the bank rate to regulate the overnight loans rate?

Accepted Answer

A) The overnight loans rate is set at a quarter percentage point above the bank rate, which in turn is set by the Bank of Canada. 
B) The bank rate is set at the settlement balances rate plus 0.25 percentage points. 
C) The bank rate is set at 0.25 percentage points below the settlement balances rate, which is used to determine the overnight loans rate. 
D) The overnight loans rate is set at 25 basis points above the bank rate. 
E) The bank rate is set at the target overnight rate plus 0.25 percentage points. 
A) The overnight loans rate is set at a quarter percentage point above the bank rate, which in turn is set by the Bank of Canada. 
B) The bank rate is set at the settlement balances rate plus 0.25 percentage points. 
C) The bank rate is set at 0.25 percentage points below the settlement balances rate, which is used to determine the overnight loans rate. 
D) The overnight loans rate is set at 25 basis points above the bank rate. 
E) The bank rate is set at the target overnight rate plus 0.25 percentage points.

Question 7

Suppose the inflation rate is 3 percent and the output gap is -1 percent.Using the Taylor rule,the Bank of Canada sets the overnight loans rate equal to

Accepted Answer

A) 5 percent. 
B) 6 percent. 
C) 4 percent. 
D) 1 percent. 
E) 5.5 percent. 
A) 5 percent. 
B) 6 percent. 
C) 4 percent. 
D) 1 percent. 
E) 5.5 percent.

Question 8

Which of the following benefits flow from the application of an inflation-control target?

Accepted Answer

A) If actual inflation exceeds the target range, the Bank of Canada can induce a recession to correct the matter. 
B) The monetary authorities can change the target range whenever they feel it is appropriate. 
C) People can make decisions with an understanding that inflation rates will remain relatively low. 
D) Financial market traders have a clearer understanding of the Bank of Canada's intentions. 
E) Both C and D. 
A) If actual inflation exceeds the target range, the Bank of Canada can induce a recession to correct the matter. 
B) The monetary authorities can change the target range whenever they feel it is appropriate. 
C) People can make decisions with an understanding that inflation rates will remain relatively low. 
D) Financial market traders have a clearer understanding of the Bank of Canada's intentions. 
E) Both C and D.

Suppose the inflation rate is 2.5 percent,and the output gap is 1 percent.Using the Taylor rule,the Bank of Canada sets the overnight loans rate equal to

Which of the following quotations correctly describes the impact of monetary policy on the economy?

When the Bank of Canada lowers the overnight loans rate,the Canadian dollar on the foreign exchange market and .

If the overnight rate is above target,the Bank securities to reserves,which the supply of overnight funds and the overnight rate.

The purchase of government bonds by the Bank of Canada

How can the Bank of Canada use the bank rate to regulate the overnight loans rate?

Suppose the inflation rate is 3 percent and the output gap is -1 percent.Using the Taylor rule,the Bank of Canada sets the overnight loans rate equal to

Which of the following benefits flow from the application of an inflation-control target?

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

International Trade Policy

Filters

Exam 30: Monetary Policy

Suppose the inflation rate is 2.5 percent,and the output gap is 1 percent.Using the Taylor rule,the Bank of Canada sets the overnight loans rate equal to

Which of the following quotations correctly describes the impact of monetary policy on the economy?

When the Bank of Canada lowers the overnight loans rate,the Canadian dollar ________ on the foreign exchange market and ________.

If the overnight rate is above target,the Bank ________ securities to ________ reserves,which ________ the supply of overnight funds and ________ the overnight rate.

The purchase of government bonds by the Bank of Canada

How can the Bank of Canada use the bank rate to regulate the overnight loans rate?

Suppose the inflation rate is 3 percent and the output gap is -1 percent.Using the Taylor rule,the Bank of Canada sets the overnight loans rate equal to

Which of the following benefits flow from the application of an inflation-control target?

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

International Trade Policy

Filters

When the Bank of Canada lowers the overnight loans rate,the Canadian dollar on the foreign exchange market and .

If the overnight rate is above target,the Bank securities to reserves,which the supply of overnight funds and the overnight rate.