Exam 11: Monetary Policy

If the Bank of Canada orders an expansionary monetary policy, describe what will happen to the following variables relative to what would have happened without the policy: a.the money supply b.interest rates c.investment d.consumption e.net exports f.the aggregate demand curve g.real GDP h.the price level

In 2008, the U.S.Treasury Department and U.S.Federal Reserve took several actions in response to the deepening financial crisis.One action was the U.S.Treasury Department's move to have the federal government take control of

When the Bank of Canada decreases the money supply, at the previous equilibrium interest rate households and firms will now want to

Monetarists think that the Bank of Canada should use ________ as a target when conducting monetary policy.

Monetary policy refers to the actions the Bank of Canada takes to manage

Suppose that households became mistrustful of the banking system and decide to decrease their chequing accounts and increase their holdings of currency.Using the money demand and money supply model and assuming everything else is held constant, the equilibrium interest rate should

The Bank of Canada has adopted an interest rate target for most of the time since World War II.

The turmoil in financial markets that began in 2007 led the Bank of Canada to put new emphasis on

When housing prices fall, as they do after a housing market bubble, most banks and other lenders ________ the requirement for borrowers, making it ________ for potential home buyers to obtain mortgages.

The ability of the Bank of Canada to use monetary policy to affect economic variables such as real GDP ultimately depends upon its ability to affect

Why doesn't the Bank of Canada have both a money supply target and an interest rate target?

Figure 11.16 Alt text for Figure 11.16: In figure 11.16, a graph comparing real GDP and price level. Long description for Figure 11.16: The x-axis is labelled, real GDP (trillions of 2007 dollars).The y-axis is labelled, price level (CPI, 2002 = 100).6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, and LRAS2.Line SRAS1 begins near the bottom left corner and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.Line AD1 begins at the top left corner and slopes down to the end of the x-axis.Line AD2 follows the same slope as line AD1, but is plotted to the right.Lines LRAS1 and LRAS2 are perpendicular to the x-axis, such that line LRAS2 is to the right of line LRAS1.Line LRAS1 intersects the lines AD1 and SRAS1 at point A.Lines AD2 and SRAS2 intersect at point B. -Refer to Figure 11.16.In the figure above, if the economy in Year 1 is at point A and is expected in Year 2 to be at point B, then the appropriate monetary policy by the Bank of Canada would be to

Your roommate is having trouble grasping how monetary policy works.Which of the following explanations could you use to correctly describe the mechanism by which the Bank of Canada can affect the economy through monetary policy? Increasing the money supply

The monetary policy target the Bank of Canada focuses primarily on today is

The Bank of Canada promptly cut the interest rate at the beginning of the 2007-2009 global financial crisis, even though the recession did not actually begin until some months later.Which of the following is the rationale for this action?

The Bank of Canada's two main ________ are the money supply and the interest rate.

If the Bank of Canada raises or lowers interest rates too late, it could result in a ________ policy that destabilizes the economy.

To reassure investors who were unwilling to buy mortgages in the secondary market, the U.S.Congress used two government sponsored enterprises, ________, to sell bonds to investors and use the funds to purchase mortgages from banks.

The Bank of Canada focuses on which of the following as their main goal of monetary policy?

The Taylor rule puts more emphasis on the inflation gap than the output gap.