Question 1

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

Accepted Answer

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

Question 2

Which of the following statements are true of the Bank of England?

Accepted Answer

A) The Bank of England was established in 1919. 
B) The governor and four deputy governors comprise the monetary policy making body. 
C) Until 1997, the decision to raise or lower interest rates resided not with the Bank of England but with the chancellor of the Exchequer. 
D) B and C only. 
A) The Bank of England was established in 1919. 
B) The governor and four deputy governors comprise the monetary policy making body. 
C) Until 1997, the decision to raise or lower interest rates resided not with the Bank of England but with the chancellor of the Exchequer. 
D) B and C only.

Question 3

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 4

Critics of Bank of Canada independence argue ________.

Accepted Answer

A) that it is undemocratic to have monetary policy controlled by an elite group responsible to no one 
B) that an independent Bank of Canada conducts monetary policy with a consistent inflationary bias 
C) that the Bank of Canada, since it does not face a binding budget constraint, spends too much of its earnings 
D) A and B only. 
A) that it is undemocratic to have monetary policy controlled by an elite group responsible to no one 
B) that an independent Bank of Canada conducts monetary policy with a consistent inflationary bias 
C) that the Bank of Canada, since it does not face a binding budget constraint, spends too much of its earnings 
D) A and B only.

Question 5

Which of the following is a responsibility of the Bank of Canada?

Accepted Answer

A) Funds management 
B) Fiscal policy 
C) Equalization payments 
D) Foreign policy 
A) Funds management 
B) Fiscal policy 
C) Equalization payments 
D) Foreign policy

Question 6

Explain two concepts of central bank independence. Is the Bank of Canada politically independent? Why do economists think central bank independence is important?

Accepted Answer

Instrument independence is the ability o

Question 7

Unemployment rates in Canada after the Great Depression rose close to ________.

Accepted Answer

A) 20 percent 
B) 25 percent 
C) 30 percent 
D) 10 percent 
A) 20 percent 
B) 25 percent 
C) 30 percent 
D) 10 percent

Question 8

In its role as provider of central banking services, the Bank of Canada holds deposit accounts of the ________.

Accepted Answer

A) provincial governments 
B) directly clearing members of the Canadian Payments Association 
C) international organizations, such as the International Monetary Fund 
D) B and C only. 
A) provincial governments 
B) directly clearing members of the Canadian Payments Association 
C) international organizations, such as the International Monetary Fund 
D) B and C only.

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 functions are not performed by the Bank of Canada?

Accepted Answer

A) Cheque clearing 
B) Conducting economic research 
C) Setting interest rates payable on time deposits 
D) Issuing new currency 
A) Cheque clearing 
B) Conducting economic research 
C) Setting interest rates payable on time deposits 
D) Issuing new currency

Question 11

Critics of the current system of Bank of Canada independence contend that ________.

Accepted Answer

A) the current system is undemocratic 
B) voters have too much say about monetary policy 
C) the governor has too much control over monetary policy on a day-today basis 
D) B and C only. 
A) the current system is undemocratic 
B) voters have too much say about monetary policy 
C) the governor has too much control over monetary policy on a day-today basis 
D) B and C only.

Question 12

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 13

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) A and C only 
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) A and C only

Question 14

Which of the following are entities of the Eurosystem?

Accepted Answer

A) The European Central Bank 
B) The central banks of the European Union countries that have adopted the euro 
C) The central banks of the euro area countries and of the European Union countries that have not yet adopted the euro 
D) A and B only 
A) The European Central Bank 
B) The central banks of the European Union countries that have adopted the euro 
C) The central banks of the euro area countries and of the European Union countries that have not yet adopted the euro 
D) A and B only

Question 15

While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy, its critics contend that its independence is ________.

Accepted Answer

A) limited by the Ministry of Finance's control over a portion of its budget 
B) too great because it need not pursue a policy of price stability even if that is the popular will of the people 
C) too great since the Ministry of Finance no longer has veto power over the bank's budget 
D) limited since the Ministry of Finance can dismiss senior bank officials 
A) limited by the Ministry of Finance's control over a portion of its budget 
B) too great because it need not pursue a policy of price stability even if that is the popular will of the people 
C) too great since the Ministry of Finance no longer has veto power over the bank's budget 
D) limited since the Ministry of Finance can dismiss senior bank officials

Question 16

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 expansionary policies are pursued to lower unemployment and interest rates. 
C) Putting the Bank of Canada under control of the government may place too much pressure on the Bank to finance federal budget deficits, thereby imparting an inflationary bias to monetary policy. 
D) All 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 expansionary policies are pursued to lower unemployment and interest rates. 
C) Putting the Bank of Canada under control of the government may place too much pressure on the Bank to finance federal budget deficits, thereby imparting an inflationary bias to monetary policy. 
D) All of the above are true statements.

Question 17

Which of the following statements are true of the Bank of England?

Accepted Answer

A) The Bank of England was established in 1894. 
B) Until 1997, the decision to raise or lower interest rates resided not with the Bank of England but with the chancellor of the Exchequer. 
C) The government can overrule the Bank and set rates "in extreme economic circumstances" and "for a limited period." 
D) B and C only. 
A) The Bank of England was established in 1894. 
B) Until 1997, the decision to raise or lower interest rates resided not with the Bank of England but with the chancellor of the Exchequer. 
C) The government can overrule the Bank and set rates "in extreme economic circumstances" and "for a limited period." 
D) B and C only.

Question 18

The Great Depression contributed to significant changes in Canadian ________.

Accepted Answer

A) deficits 
B) monetary policy 
C) foreign affairs policy 
D) immigration policy 
A) deficits 
B) monetary policy 
C) foreign affairs policy 
D) immigration policy

Question 19

Which of the following functions are not performed by the Bank of Canada in its role as the federal government's fiscal agent?

Accepted Answer

A) Advising on federal government borrowings 
B) Managing new debt offerings by the federal government 
C) Setting interest rates payable on time deposits 
D) Servicing the federal government's outstanding debt 
A) Advising on federal government borrowings 
B) Managing new debt offerings by the federal government 
C) Setting interest rates payable on time deposits 
D) Servicing the federal government's outstanding debt

Question 20

The Bank of Canada has regional offices in which of the following cities?

Accepted Answer

A) Saskatoon 
B) Edmonton 
C) Montreal 
D) Winnipeg 
A) Saskatoon 
B) Edmonton 
C) Montreal 
D) Winnipeg

Exam 14: Central Banks and the Bank of Canada

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

Which of the following statements are true of the Bank of England?

The Great Depression contributed to significant changes in Canadian ________.

Critics of Bank of Canada independence argue ________.

Which of the following is a responsibility of the Bank of Canada?

Explain two concepts of central bank independence. Is the Bank of Canada politically independent? Why do economists think central bank independence is important?

Unemployment rates in Canada after the Great Depression rose close to ________.

In its role as provider of central banking services, the Bank of Canada holds deposit accounts of the ________.

Foreign exchange reserves are held by ________.

Which of the following functions are not performed by the Bank of Canada?

Critics of the current system of Bank of Canada independence contend that ________.

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

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

Which of the following are entities of the Eurosystem?

While legislation enacted in 1998 granted the Bank of Japan new powers and greater autonomy, its critics contend that its independence is ________.

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

Which of the following statements are true of the Bank of England?

The Great Depression contributed to significant changes in Canadian ________.

Which of the following functions are not performed by the Bank of Canada in its role as the federal government's fiscal agent?

The Bank of Canada has regional offices in which of the following cities?

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

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

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Goal independence is the ability of to set monetary policy .