Question 1

It may be necessary to cut the deficit as part of a credible anti-inflationary policy because the public knows that large deficits ________.

Accepted Answer

A) are inflationary by themselves in the long run 
B) create inefficiencies 
C) put pressure on the Bank of Canada to expand the money supply to keep interest rates from rising 
D) put pressure on the Bank of Canada to contract the money supply to prevent employment from rising 
A) are inflationary by themselves in the long run 
B) create inefficiencies 
C) put pressure on the Bank of Canada to expand the money supply to keep interest rates from rising 
D) put pressure on the Bank of Canada to contract the money supply to prevent employment from rising

Question 2

An example of a negative supply shock is ________.

Accepted Answer

A) carbon cap-and-trade program 
B) a rapid increase in energy costs 
C) a fall in the price of oil 
D) the shale gas revolution 
A) carbon cap-and-trade program 
B) a rapid increase in energy costs 
C) a fall in the price of oil 
D) the shale gas revolution

Question 3

Explain why the Bank of Canada had a credibility problem during the 1970s.

Accepted Answer

In the early 1970s, the Bank of Canada a

Question 4

The difference in outcomes occurring with a credible nominal anchor and without one, given a negative aggregate supply shock is that ________.

Accepted Answer

A) the overall economic outlook is better 
B) there is no difference but credibility provides national security 
C) without credible policy, inflation will continue to spiral upwards 
D) with credible policy, the aggregate supply curve shifts back quickly 
A) the overall economic outlook is better 
B) there is no difference but credibility provides national security 
C) without credible policy, inflation will continue to spiral upwards 
D) with credible policy, the aggregate supply curve shifts back quickly

Question 5

Operating with discretion in a monetary policy sense implies ________.

Accepted Answer

A) making no commitment to future actions 
B) a constant growth rate rule 
C) introducing a zero inflation rule 
D) making decisions without regulatory oversight 
A) making no commitment to future actions 
B) a constant growth rate rule 
C) introducing a zero inflation rule 
D) making decisions without regulatory oversight

Question 6

Evidence indicating that the wage and price adjustment process is extremely slow would strengthen the case for ________.

Accepted Answer

A) nondiscretionary policy 
B) a constant-money-growth-rate rule 
C) discretionary policy 
D) None of the above 
A) nondiscretionary policy 
B) a constant-money-growth-rate rule 
C) discretionary policy 
D) None of the above

Question 7

Arguments for discretionary policies include ________.

Accepted Answer

A) policy rules can be too rigid because they cannot foresee every contingency 
B) policy rules do not easily incorporate the use of judgment 
C) discretion avoids the straightjacket that would lock in the wrong policy if the model that was used to derive the policy rule proved to be incorrect 
D) discretion enables policy makers to change policy settings when an economy undergoes structural changes 
E) all of the above 
A) policy rules can be too rigid because they cannot foresee every contingency 
B) policy rules do not easily incorporate the use of judgment 
C) discretion avoids the straightjacket that would lock in the wrong policy if the model that was used to derive the policy rule proved to be incorrect 
D) discretion enables policy makers to change policy settings when an economy undergoes structural changes 
E) all of the above

Question 8

By ________ its deficit, the government makes an anti-inflationary policy ________ credible.

Accepted Answer

A) increasing; more 
B) reducing; more 
C) reducing; less 
D) not changing; more 
A) increasing; more 
B) reducing; more 
C) reducing; less 
D) not changing; more

Question 9

The opposite of a discretionary approach is a ________ approach.

Accepted Answer

A) rules based 
B) activist 
C) non-activist 
D) Keynesian 
A) rules based 
B) activist 
C) non-activist 
D) Keynesian

Question 10

An example of a rule used in non-discretionary monetary policy is ________.

Accepted Answer

A) the Taylor rule 
B) the Taylor principle 
C) Keynesian rule 
D) interest rate consistency 
A) the Taylor rule 
B) the Taylor principle 
C) Keynesian rule 
D) interest rate consistency

It may be necessary to cut the deficit as part of a credible anti-inflationary policy because the public knows that large deficits ________.

An example of a negative supply shock is ________.

Explain why the Bank of Canada had a credibility problem during the 1970s.

The difference in outcomes occurring with a credible nominal anchor and without one, given a negative aggregate supply shock is that ________.

Operating with discretion in a monetary policy sense implies ________.

Evidence indicating that the wage and price adjustment process is extremely slow would strengthen the case for ________.

Arguments for discretionary policies include ________.

By its deficit, the government makes an anti-inflationary policy credible.

The opposite of a discretionary approach is a ________ approach.

An example of a rule used in non-discretionary monetary policy 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

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

Exam 25: The Role of Expectations in Monetary Policy

It may be necessary to cut the deficit as part of a credible anti-inflationary policy because the public knows that large deficits ________.

An example of a negative supply shock is ________.

Explain why the Bank of Canada had a credibility problem during the 1970s.

The difference in outcomes occurring with a credible nominal anchor and without one, given a negative aggregate supply shock is that ________.

Operating with discretion in a monetary policy sense implies ________.

Evidence indicating that the wage and price adjustment process is extremely slow would strengthen the case for ________.

Arguments for discretionary policies include ________.

By ________ its deficit, the government makes an anti-inflationary policy ________ credible.

The opposite of a discretionary approach is a ________ approach.

An example of a rule used in non-discretionary monetary policy 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

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

By its deficit, the government makes an anti-inflationary policy credible.