Exam 11: Monetary Policy

Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP equals potential GDP, then the overnight interest rate target rate equals the

The Bank of Canada does not target both the money supply and an interest rate because

The overnight interest rate

Figure 11.10 Alt text for Figure 11.10: In figure 11.10, a graph comparing real GDP and price level. Long description for Figure 11.10: The x-axis is labelled, real GDP (trillions of 2007 dollars)and the y-axis is labelled, price level (CPI, 2002 = 100).3 lines are shown; AD, LRAS, SRAS.Line AD begins in the top left corner and slopes down to the end of the x-axis.Line SRAS begins in the bottom left corner and slopes up to the top right corner.Line LRAS is perpendicular to the x-axis, and intersects the lines AD and SRAS.The point of intersection of lines AD and SRAS is marked as A. -Refer to Figure 11.10.In the figure above, if the economy is at point A, the appropriate monetary policy by the Bank of Canada would be to

If the probability of losing your job remains ________, a recession would be a good time to purchase a home because the Bank of Canada usually ________ interest rates during this time.

In October 2008, the U.S.Congress passed the ________, under which the U.S.Treasury provided funds to banks in exchange for stock.

An increase in the price level causes

The Bank of Canada

Which of the following are goals of monetary policy?

An increase in the interest rate causes

In March 2008, the U.S.Federal Reserve announced that primary dealers would be eligible to receive discount loans.

The smaller the fraction of an investment financed by borrowing,

Figure 11.1 Alt text for Figure 11.1: In figure 11.1, a graph shows shift in the money demand curve. Long description for Figure 11.1: The x-axis is labelled, quantity of money, M (billions of dollars).The y-axis is labelled, interest rate, i.2 lines are shown; MD1 and MD2.Line MD1 begins in the top left corner and slopes down to the end of the x-axis.Line MD2 follows the same slope as line MD1, but is plotted to the right. -Refer to Figure 11.1.In the figure, the money demand curve would move from MD₁ to MD₂ if

Assume the unemployment rate is rising and price levels are falling.The Bank of Canada would be mostly likely to engage in

Figure 11.13 Alt text for Figure 11.13: In figure 11.13, a dynamic model of AD-AS. Long description for Figure 11.13: The x-axis is labelled, real GDP (trillions of 2007 dollars), with values $1.4, 1.5, 1.6 marked.The y-axis is labelled, price level (CPI), with values 100 and 102 marked.6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, LRAS2.Line SRAS1 begins in the bottom left 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 AD1, but is plotted to the right.Line LRAS1 is perpendicular to the x-axis, and begins from the x-axis value $1.4.Line LRAS2 is perpendicular to the x-axis, and begins from the value 1.6.Line LRAS1 intersects line AD1 and SRAS1 at point A ($1.4, 100).Lines AD2 and SRAS2 intersect at point B (1.5, 102).Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS2 intersects lines SRAS1 and SRAS2 on the right end of these lines.Similarly, line LRAS2 intersects lines AD1 and AD2 toward the right end of these lines. -Refer to Figure 11.13.In the dynamic model of AD-AS in the figure above, 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 the appropriate policy.This will result in

The money market model is concerned with ________ and the loanable funds market model is concerned with ________.

By the 2000s, U.S.investment banks had become significant participants in the secondary market for mortgages.

Canadian banks are regulated by the Bank of Canada.

When the Bank of Canada increases the money supply, people spend more because they now have more money.

The money supply curve is vertical if