Exam 11: Monetary Policy

The U.S.Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is one of the ways the U.S.Federal Reserve responded?

If the Bank of Canada's policy is contractionary, it will

Despite saving Lehman Brothers from failing, the U.S.Federal Reserve and the U.S.Treasury Department decided to allow Bear Stearns to go bankrupt, which it did in September, 2008.

The Bank of Canada can directly lower the inflation rate.

Beginning in 2008, the U.S.Federal Reserve and the U.S.Treasury Department responded to the financial crisis by intervening in financial markets in unprecedented ways.Briefly summarize the actions of the U.S.Fed and the U.S.Treasury.

Changes in the overnight interest rate usually result in

By May 2009, bank reserves in the U.S.had soared to more than US$900 billion.Which of the following is not a reason partially explaining why banks were piling up excess reserves rather than lending funds out?

From an initial long-run macroeconomic equilibrium, if the Bank of Canada anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply, then the Bank of Canada would most likely

When the Bank of Canada increases the money supply,

If the amount you owe on your house is less than the price of the house, you have

Contractionary monetary policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

Figure 11.14 Alt text for Figure 11.14: In figure 11.14, a dynamic AD-AS model. Long description for Figure 11.14: The x-axis is labelled, real GDP (trillions of 2007 dollars).The y-axis is labelled, price level (CPI).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.Line LRAS1 is perpendicular to the x-axis and begins from x-axis value 1.7.Line LRAS2 is perpendicular to the x-axis and begins from x-axis value 1.9.Line LRAS1 intersects lines AD1 and SRAS1 at point A (1.7, 100).Lines AD2 and SRAS2 intersect at point B (1.94, 104).Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS1 intersects line SRAS2 below point A.Line LRAS2 intersects lines SRAS1 and AD2 just above point B. -Refer to Figure 11.14.In the dynamic AD-AS model, if the economy is at point A in year 1 and is expected to go to point B in year 2, and the Bank of Canada pursues no policy, then at point B

Which of the following would cause the money demand curve to shift to the left?

The body that is responsible for dating the beginning and ending dates for a recession is

Use the money demand and money supply model to show graphically and explain the effect on interest rates of the Bank of Canada's open market sale of government of Canada securities.

Table 11.9 -Refer to Table 11.9.Suppose the table above illustrates the values of real and potential GDP and the price level if the Bank of Canada does not change its current policy to be more contractionary or expansionary.Suppose that the Bank of Canada uses an appropriate policy and is successful in keeping real GDP at potential in 2013.Draw an aggregate demand and supply curve to illustrate your answer.

The Bank of Canada cannot target both the money supply and the interest rate because it does not control

The supporters of a monetary growth rule believe that active monetary policy

Low interest rates that resulted from the Bank of Canada's response to the global financial crisis have caused Canadian household debt to disposable income ratio to ________, causing the likelihood of a housing bubble to ________.

Figure 11.17 Alt text for Figure 11.17: In figure 11.17, a graph comparing real GDP and price level. Long description for Figure 11.17: The x-axis is labelled, real GDP (trillions of 2007 dollars).The y-axis is labelled, price level (CPI, 2002 = 100).7 lines are shown; SRAS1, SRAS2, AD1, AD without policy, AD with policy, 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.Lines AD without policy, and AD with policy, follow the same slope as line AD1, but are 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 lines AD1 and SRAS1 at point A.Lines AD without policy, and SRAS2 intersect at point B.Line LRAS2 intersects the lines AD with policy, and SRAS2 at point C. -Refer to Figure 11.17.In the figure above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B.Which of the following policies could the Bank of Canada use to move the economy to point C?