Question 1

The Automated Clearing Settlement System (ACSS)________.

Accepted Answer

A) was introduced on February 4, 1999 
B) is an electronic net settlement network designed to provide settlement to wholesale transactions 
C) aggregates interbank payments and informs the Bank of Canada of the net amounts to be transferred from and to each participant's settlement account with the Bank of Canada 
D) A and B only. 
A) was introduced on February 4, 1999 
B) is an electronic net settlement network designed to provide settlement to wholesale transactions 
C) aggregates interbank payments and informs the Bank of Canada of the net amounts to be transferred from and to each participant's settlement account with the Bank of Canada 
D) A and B only.

Question 2

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 3

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 4

What is the function of the ACSS?

Accepted Answer

The ACSS is an electronic payments syste

Question 5

The Bank of Canada neutralizes government receipts by ________.

Accepted Answer

A) arranging an increase in government deposit auctions 
B) leaving the system in a surplus position at the end of the day 
C) reducing the banking system's settlement balances 
D) leaving the system in a deficit position at the end of the day 
A) arranging an increase in government deposit auctions 
B) leaving the system in a surplus position at the end of the day 
C) reducing the banking system's settlement balances 
D) leaving the system in a deficit position at the end of the day

Question 6

The LVTS was put in place in order to eliminate the ________.

Accepted Answer

A) systemic risk 
B) principal-agent problem 
C) moral hazard problem 
D) credit risk 
A) systemic risk 
B) principal-agent problem 
C) moral hazard problem 
D) credit risk

Question 7

Explain the Bank of Canada's open market operations? What are SPRAs and SRAs? How are they used to impact the overnight rate?

Accepted Answer

SPRA is special Purchase and Resale Agre

Question 8

Quantitative easing is a high-risk monetary policy tool as it runs the risk of ________.

Accepted Answer

A) possibly creating deflation 
B) possibly creating inflation and even hyperinflation 
C) having no effect 
D) having very short-term effects 
A) possibly creating deflation 
B) possibly creating inflation and even hyperinflation 
C) having no effect 
D) having very short-term effects

Question 9

The Bank of Canada's lender-of-last-resort function ________.

Accepted Answer

A) is no longer necessary due to CDIC insurance 
B) has proven to be ineffective 
C) is needed to prevent runs by large-denomination depositors 
D) A and B only. 
A) is no longer necessary due to CDIC insurance 
B) has proven to be ineffective 
C) is needed to prevent runs by large-denomination depositors 
D) A and B only.

Question 10

If the Bank of Canada wants to relieve undesired upward pressure on the overnight interest rate it will enter into a ________.

Accepted Answer

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

Question 11

When the Bank of Canada lowers the operating band for the overnight interest rate, it ________.

Accepted Answer

A) lowers the bank rate by the same amount 
B) encourages LVTS participants to borrow reserves either from each other or from the Bank of Canada 
C) it reduces the monetary base and ultimately the money supply 
D) A and B only. 
A) lowers the bank rate by the same amount 
B) encourages LVTS participants to borrow reserves either from each other or from the Bank of Canada 
C) it reduces the monetary base and ultimately the money supply 
D) A and B only.

Question 12

If the operating target of the Bank of Canada is 4 percent then the bank rate is ________.

Accepted Answer

A) 4)25 percent 
B) 4)50 percent 
C) 3)5 percent 
D) 4 percent 
A) 4)25 percent 
B) 4)50 percent 
C) 3)5 percent 
D) 4 percent

Question 13

Explain why the bank rate minus 50 basis points (ib-50)is the lower limit for the overnight rate.

Accepted Answer

When demand for reserves falls and the o

Question 14

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________ and the bank rate is ________.

Accepted Answer

A) 3)75 percent; 4 percent 
B) 4 percent; 4.25 percent 
C) 3)25 percent; 3.5 percent 
D) 3 percent; 3.25 
A) 3)75 percent; 4 percent 
B) 4 percent; 4.25 percent 
C) 3)25 percent; 3.5 percent 
D) 3 percent; 3.25

Question 15

The ACSS is operated by the ________.

Accepted Answer

A) Canadian Payments Association 
B) Bank of Canada 
C) Ministry of Finance 
D) LVTS 
A) Canadian Payments Association 
B) Bank of Canada 
C) Ministry of Finance 
D) LVTS

Question 16

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) A and B only. 
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) A and B only.

Question 17

The overnight market in Canada is ________ with a ________ range of participants.

Accepted Answer

A) very liquid; broad 
B) very liquid; narrow 
C) not very liquid; broad 
D) not very liquid; narrow 
A) very liquid; broad 
B) very liquid; narrow 
C) not very liquid; broad 
D) not very liquid; narrow

Question 18

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 19

If the Bank of Canada expects the economy to slow down, it ________ the operating band for the overnight interest rate.

Accepted Answer

A) lowers 
B) raises 
C) leaves unchanged 
D) stabilizes 
A) lowers 
B) raises 
C) leaves unchanged 
D) stabilizes

Question 20

SPRAs and SRAs are ________ open market operations.

Accepted Answer

A) temporary 
B) permanent 
C) risky 
D) conducted 8 times a year 
A) temporary 
B) permanent 
C) risky 
D) conducted 8 times a year

Exam 16: Tools of Monetary Policy

The Automated Clearing Settlement System (ACSS)________.

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

Multilateral netting is ________.

What is the function of the ACSS?

The Bank of Canada neutralizes government receipts by ________.

The LVTS was put in place in order to eliminate the ________.

Explain the Bank of Canada's open market operations? What are SPRAs and SRAs? How are they used to impact the overnight rate?

Quantitative easing is a high-risk monetary policy tool as it runs the risk of ________.

The Bank of Canada's lender-of-last-resort function ________.

If the Bank of Canada wants to relieve undesired upward pressure on the overnight interest rate it will enter into a ________.

When the Bank of Canada lowers the operating band for the overnight interest rate, it ________.

If the operating target of the Bank of Canada is 4 percent then the bank rate is ________.

Explain why the bank rate minus 50 basis points (ib-50)is the lower limit for the overnight rate.

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________ and the bank rate is ________.

The ACSS is operated by the ________.

The Automated Clearing Settlement System (ACSS)________.

The overnight market in Canada is ________ with a ________ range of participants.

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

If the Bank of Canada expects the economy to slow down, it ________ the operating band for the overnight interest rate.

SPRAs and SRAs are ________ open market operations.

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

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is and the bank rate is .

The overnight market in Canada is with a range of participants.