Question 1

LVTS participants with positive settlement balances at the end of the day ________.

Accepted Answer

A)  are paid the bank rate 
B)  are paid the overnight rate 
C)  are paid the bank rate less 50 basis points 
D)  are paid the prime rate 
A)  are paid the bank rate 
B)  are paid the overnight rate 
C)  are paid the bank rate less 50 basis points 
D)  are paid the prime rate

Question 2

The Automated Clearing Settlement System (ACSS)________.

Accepted Answer

A)  is the core of the Canadian payments system 
B)  is an electronic net settlement network designed to provide settlement to wholesale transactions 
C)  is an electronic net settlement network designed to provide settlement to paper-based payment items 
D)  Only A and B of the above. 
A)  is the core of the Canadian payments system 
B)  is an electronic net settlement network designed to provide settlement to wholesale transactions 
C)  is an electronic net settlement network designed to provide settlement to paper-based payment items 
D)  Only A and B of the above.

Question 3

A reverse repo is a ________.

Accepted Answer

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

Question 4

The channel/corridor system for setting interest rates ________.

Accepted Answer

A)  is not appropriate for Canadian monetary policy 
B)  limits the amount banks can borrow from the central bank 
C)  enables the central bank to set the overnight, policy rate 
D)  is being phased out as a monetary policy tool 
A)  is not appropriate for Canadian monetary policy 
B)  limits the amount banks can borrow from the central bank 
C)  enables the central bank to set the overnight, policy rate 
D)  is being phased out as a monetary policy tool

Question 5

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 6

If the operating target of the Bank of Canada is 4.5 percent then the bank rate is ________.

Accepted Answer

A)  4.75 percent 
B)  5.25 percent 
C)  4.25 percent 
D)  4.5 percent 
A)  4.75 percent 
B)  5.25 percent 
C)  4.25 percent 
D)  4.5 percent

Question 7

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 8

Although transactions in the LVTS account for less than ________ of the total number of transactions,they account for about ________ of the value of transactions.

Accepted Answer

A)  1 percent; 94 percent 
B)  5 percent; 90 percent 
C)  10 percent; 85 percent 
D)  20 percent; 80 percent 
A)  1 percent; 94 percent 
B)  5 percent; 90 percent 
C)  10 percent; 85 percent 
D)  20 percent; 80 percent

Question 9

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

Accepted Answer

A)  a repurchase agreement 
B)  a sale and repurchase agreement 
C)  a "pump" agreement 
D)  None of the above. 
A)  a repurchase agreement 
B)  a sale and repurchase agreement 
C)  a "pump" agreement 
D)  None of the above.

Question 10

If government deposits at the Bank of Canada are predicted to decrease,the Bank will offset the transaction through government deposit auctions to ________ settlement balances.

Accepted Answer

A)  decrease 
B)  increase 
C)  inject 
D)  resupply 
A)  decrease 
B)  increase 
C)  inject 
D)  resupply

Question 11

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 12

If government deposits at the Bank of Canada are predicted to decrease the Bank will offset the transaction through LVTS transfers to ________ settlement balances.

Accepted Answer

A)  increase 
B)  decrease 
C)  flood 
D)  inject 
A)  increase 
B)  decrease 
C)  flood 
D)  inject

Question 13

The opportunity cost of holding excess reserves is ________.

Accepted Answer

A)  the bank rate 
B)  the prime rate 
C)  the treasury bill rate 
D)  the overnight rate 
A)  the bank rate 
B)  the prime rate 
C)  the treasury bill rate 
D)  the overnight rate

Question 14

The Bank of Canada's repurchase transactions are an advantage because ________.

Accepted Answer

A)  they occur at the initiative of the Bank of Canada 
B)  the bank has complete control over the volume 
C)  they are monopolized by the Bank of Canada 
D)  Only A and B of the above. 
A)  they occur at the initiative of the Bank of Canada 
B)  the bank has complete control over the volume 
C)  they are monopolized by the Bank of Canada 
D)  Only A and B of the above.

Question 15

The Bank of Canada neutralizes special PRA operations so as to ________.

Accepted Answer

A)  not to leave the system in a surplus position at the end of the day 
B)  to leave the system in a surplus position at the end of the day 
C)  to leave the system changed at the end of the day 
D)  as to leave the system in a deficit position at the end of the day 
A)  not to leave the system in a surplus position at the end of the day 
B)  to leave the system in a surplus position at the end of the day 
C)  to leave the system changed at the end of the day 
D)  as to leave the system in a deficit position at the end of the day

Question 16

Multilateral netting is ________.

Accepted Answer

A)  the netting of the credit or debit position of each participant vis-à-vis all other participants 
B)  an electronic net settlement network designed to provide settlement to paper-based payment items 
C)  the netting of the forward position of LVTS participants 
D)  None of the above. 
A)  the netting of the credit or debit position of each participant vis-à-vis all other participants 
B)  an electronic net settlement network designed to provide settlement to paper-based payment items 
C)  the netting of the forward position of LVTS participants 
D)  None of the above.

Question 17

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)  Both A and C of the above. 
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)  Both A and C of the above.

Question 18

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 19

The Bank of Canada will engage in a sale and repurchase 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 20

The lower limit of the operating band for the overnight interest rate is ________.

Accepted Answer

A)  the bank rate 
B)  the prime rate 
C)  the rate the Bank of Canada charges LVTS participants with negative settlement balances at the end of the banking day 
D)  50 basis points below the bank rate. 
A)  the bank rate 
B)  the prime rate 
C)  the rate the Bank of Canada charges LVTS participants with negative settlement balances at the end of the banking day 
D)  50 basis points below the bank rate.

Exam 17: Tools of Monetary Policy

LVTS participants with positive settlement balances at the end of the day ________.

The Automated Clearing Settlement System (ACSS)________.

A reverse repo is a ________.

The channel/corridor system for setting interest rates ________.

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

If the operating target of the Bank of Canada is 4.5 percent then the bank rate is ________.

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

Although transactions in the LVTS account for less than ________ of the total number of transactions,they account for about ________ of the value of transactions.

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

If government deposits at the Bank of Canada are predicted to decrease,the Bank will offset the transaction through government deposit auctions to ________ settlement balances.

Special Purchase and Resale Agreements ________.

If government deposits at the Bank of Canada are predicted to decrease the Bank will offset the transaction through LVTS transfers to ________ settlement balances.

The opportunity cost of holding excess reserves is ________.

The Bank of Canada's repurchase transactions are an advantage because ________.

The Bank of Canada neutralizes special PRA operations so as to ________.

Multilateral netting is ________.

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

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

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

The lower limit of the operating band for the overnight interest rate is ________.

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

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

The ISLM Model

Filters

Although transactions in the LVTS account for less than of the total number of transactions,they account for about of the value of transactions.

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