Question 1

The oldest central bank,having been founded in 1656,is the ________.

Accepted Answer

A)  Riksbank, the central bank of Sweden 
B)  Deutsche Bundesbank 
C)  Bank of Japan 
D)  Federal Reserve System 
A)  Riksbank, the central bank of Sweden 
B)  Deutsche Bundesbank 
C)  Bank of Japan 
D)  Federal Reserve System

Question 2

Which of the following statements about central bank structure and independence are not true?

Accepted Answer

A)  In recent years, with the exception of the Bank of England and the Bank of Japan, most countries have reduced the independence of their central banks, subjecting them to greater democratic control. 
B)  Before the Bank of England was granted greater independence, the Federal Reserve was the most independent of the world's central banks. 
C)  Both theory and experience suggest that more independent central banks produce better monetary policy. 
D)  Only A and B of the above are false statements. 
A)  In recent years, with the exception of the Bank of England and the Bank of Japan, most countries have reduced the independence of their central banks, subjecting them to greater democratic control. 
B)  Before the Bank of England was granted greater independence, the Federal Reserve was the most independent of the world's central banks. 
C)  Both theory and experience suggest that more independent central banks produce better monetary policy. 
D)  Only A and B of the above are false statements.

Question 3

The theory of bureaucratic behavior suggests that a consumer's behaviour is motivated by the ________.

Accepted Answer

A)  maximization of personal welfare 
B)  maximization social welfare 
C)  minimization of government intervention 
D)  minimization political pressure 
A)  maximization of personal welfare 
B)  maximization social welfare 
C)  minimization of government intervention 
D)  minimization political pressure

Question 4

Regarding central bank independence,________.

Accepted Answer

A)  the Fed is more independent than the European Central Bank 
B)  the European Central Bank is more independent than the Fed 
C)  the trend in industrialized nations has been to reduce central bank independence 
D)  the Bank of England has the longest tradition of independence of any central bank in the world 
A)  the Fed is more independent than the European Central Bank 
B)  the European Central Bank is more independent than the Fed 
C)  the trend in industrialized nations has been to reduce central bank independence 
D)  the Bank of England has the longest tradition of independence of any central bank in the world

Question 5

The systematic and permanent differences in macroeconomic outcomes that differ by political party are known as ________ business cycles.

Accepted Answer

A)  partisan 
B)  electoral 
C)  real 
D)  nominal 
A)  partisan 
B)  electoral 
C)  real 
D)  nominal

Question 6

The theory of bureaucratic behaviour suggests that the Bank of Canada will fight ________.

Accepted Answer

A)  to preserve the public's welfare 
B)  to maximize profits 
C)  minimize its own welfare 
D)  to preserve autonomy 
A)  to preserve the public's welfare 
B)  to maximize profits 
C)  minimize its own welfare 
D)  to preserve autonomy

Question 7

The Bank of Canada enjoys ________.

Accepted Answer

A)  instrument independence 
B)  political dependence 
C)  goal independence 
D)  Both A and C of the above. 
A)  instrument independence 
B)  political dependence 
C)  goal independence 
D)  Both A and C of the above.

Question 8

Describe the structure of the Bank of Canada.

Accepted Answer

The overall responsibility for the opera

Question 9

Foreign exchange reserves are held by ________.

Accepted Answer

A)  the federal government 
B)  the department of finance 
C)  the Ministry of Central Banking 
D)  individual provinces and territories 
A)  the federal government 
B)  the department of finance 
C)  the Ministry of Central Banking 
D)  individual provinces and territories

Question 10

Which of the following statements concerning an independent central bank are true?

Accepted Answer

A)  Politicians may prefer an independent central bank, as it can be used as a "whipping boy" or "scapegoat" for poor economic performance. 
B)  Politicians in a democratic society may be shortsighted because of their desire to win reelection; thus, the political process may generate a political business cycle, in which just before an election contractionary policies are pursued to raise unemployment and interest rates. 
C)  Putting the Bank of Canada under control of the government may place too much pressure on the Bank of Canada to finance federal budget deficits, thereby imparting an inflationary bias to monetary policy. 
D)  Only A and C of the above are true statements. 
A)  Politicians may prefer an independent central bank, as it can be used as a "whipping boy" or "scapegoat" for poor economic performance. 
B)  Politicians in a democratic society may be shortsighted because of their desire to win reelection; thus, the political process may generate a political business cycle, in which just before an election contractionary policies are pursued to raise unemployment and interest rates. 
C)  Putting the Bank of Canada under control of the government may place too much pressure on the Bank of Canada to finance federal budget deficits, thereby imparting an inflationary bias to monetary policy. 
D)  Only A and C of the above are true statements.

Question 11

The Bank of Canada enjoys ________.

Accepted Answer

A)  instrument independence 
B)  political independence 
C)  goal independence 
D)  Only A and B of the above. 
A)  instrument independence 
B)  political independence 
C)  goal independence 
D)  Only A and B of the above.

Question 12

The political business cycle refers to the phenomenon that just before elections,politicians enact ________ policies.After the elections,the bad effects of these policies (for example,________ )have to be counteracted with ________ policies.

Accepted Answer

A)  expansionary; higher unemployment; contractionary 
B)  expansionary; a higher inflation rate; contractionary 
C)  contractionary; higher unemployment; expansionary 
D)  contractionary; a higher inflation rate; expansionary 
A)  expansionary; higher unemployment; contractionary 
B)  expansionary; a higher inflation rate; contractionary 
C)  contractionary; higher unemployment; expansionary 
D)  contractionary; a higher inflation rate; expansionary

Question 13

The Great Depression contributed to significant changes in Canadian ________.

Accepted Answer

A)  monetary policy 
B)  nationalization 
C)  growth policy 
D)  immigration 
A)  monetary policy 
B)  nationalization 
C)  growth policy 
D)  immigration

Question 14

Which of the following are entities of the Eurosystem?

Accepted Answer

A)  The European Central Bank 
B)  National finance ministries in each country 
C)  The Governing Council of the European Central Bank 
D)  Both A and C of the above 
A)  The European Central Bank 
B)  National finance ministries in each country 
C)  The Governing Council of the European Central Bank 
D)  Both A and C of the above

Question 15

What contributed to the move towards accountability and transparency of the Bank of Canada?

Accepted Answer

The Bank's move towards accountability a

Question 16

How do political cycles influence aggregate economic activity?

Accepted Answer

We distinguish between two types of poli

Question 17

The main motivation for the formation of the Bank of Canada in 1934 was ________.

Accepted Answer

A)  financial 
B)  the need for Canada to reflect its growing political independence from Britain 
C)  the need for Canada to coordinate its international trade policy 
D)  government debt 
A)  financial 
B)  the need for Canada to reflect its growing political independence from Britain 
C)  the need for Canada to coordinate its international trade policy 
D)  government debt

Question 18

The trend in recent years is that more and more governments ________.

Accepted Answer

A)  have been granting greater independence to their central banks 
B)  have been reducing the independence of their central banks to make them more accountable for poor economic performance 
C)  have mandated that their central banks focus on controlling inflation 
D)  have required their central banks to cooperate more with their Ministers of Finance 
A)  have been granting greater independence to their central banks 
B)  have been reducing the independence of their central banks to make them more accountable for poor economic performance 
C)  have mandated that their central banks focus on controlling inflation 
D)  have required their central banks to cooperate more with their Ministers of Finance

Question 19

As the federal government's fiscal agent the Bank of Canada provides ________ management services for the federal government.

Accepted Answer

A)  debt 
B)  cost 
C)  financial 
D)  economic 
A)  debt 
B)  cost 
C)  financial 
D)  economic

Question 20

Instrument independence is the ability of ________ to set monetary policy ________.

Accepted Answer

A)  the central bank; goals 
B)  Parliament; goals 
C)  Parliament; instruments 
D)  the central bank; instruments 
A)  the central bank; goals 
B)  Parliament; goals 
C)  Parliament; instruments 
D)  the central bank; instruments

Exam 15: Central Banks and the Bank of Canada

The oldest central bank,having been founded in 1656,is the ________.

Which of the following statements about central bank structure and independence are not true?

The theory of bureaucratic behavior suggests that a consumer's behaviour is motivated by the ________.

Regarding central bank independence,________.

The systematic and permanent differences in macroeconomic outcomes that differ by political party are known as ________ business cycles.

The theory of bureaucratic behaviour suggests that the Bank of Canada will fight ________.

The Bank of Canada enjoys ________.

Describe the structure of the Bank of Canada.

Foreign exchange reserves are held by ________.

Which of the following statements concerning an independent central bank are true?

The Bank of Canada enjoys ________.

The political business cycle refers to the phenomenon that just before elections,politicians enact ________ policies.After the elections,the bad effects of these policies (for example,________ )have to be counteracted with ________ policies.

The Great Depression contributed to significant changes in Canadian ________.

Which of the following are entities of the Eurosystem?

What contributed to the move towards accountability and transparency of the Bank of Canada?

How do political cycles influence aggregate economic activity?

The main motivation for the formation of the Bank of Canada in 1934 was ________.

The trend in recent years is that more and more governments ________.

As the federal government's fiscal agent the Bank of Canada provides ________ management services for the federal government.

Instrument independence is the ability of ________ to set monetary policy ________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding 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

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

The Money Supply Process

Tools of Monetary Policy

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

The ISLM Model

Filters

The political business cycle refers to the phenomenon that just before elections,politicians enact policies.After the elections,the bad effects of these policies (for example, )have to be counteracted with policies.

Instrument independence is the ability of to set monetary policy .