Exam 28: Monetary Policy in Canada

Why is high and uncertain inflation damaging to the economy? Because in the presence of high and uncertain inflation,

In practice,the Bank of Canada implements its monetary policy by

Suppose the Canadian economy had a recessionary gap.To increase the level of desired aggregate expenditure,the Bank of Canada could

What is one problem with focusing on the CPI as the measure of inflation when conducting monetary policy?

Suppose the Bank of Canada raises its target for the overnight interest rate and longer-term rates in the market rise as a result.Households' and firms' demand for loans from the commercial banks would ________.In order to accommodate this change,the commercial banks require ________.

Suppose the Bank of Canada reduces its target for the overnight interest rate by 0.50 percentage points.In this situation,the Bank will likely need to accommodate the eventual resulting change in the demand for money by

The amount of currency in circulation in the Canadian economy is described as being endogenous to the system.This description is appropriate because

Given its existing policy regime of "inflation targeting," the Bank of Canada would likely react to a large negative AD shock by

Suppose Canadian real GDP is equal to potential GDP.An appreciation of the Canadian dollar then implies that the Bank of Canada should engage in

Which of the following events would justify the Bank of Canada implementing an expansionary monetary policy,while maintaining its commitment to its inflation target?

Suppose the Bank of Canada wishes to expand the money supply directly.To do so,the Bank could

The diagrams below illustrate two alternative approaches to implementing monetary policy.The economy begins in monetary equilibrium with the interest rate equal to 2% and the money supply equal to . FIGURE 28-1 Refer to Figure 28-1.One advantage of implementing monetary policy by targeting the interest rate as shown in part (i),rather than targeting the money supply as shown in part (ii),is that

In 1994,Gordon Thiessen was appointed as the new governor of the Bank of Canada.Governor Thiessen proceeded to

If there were a large and persistent recessionary gap,an appropriate monetary policy could include

Which of the following goods are included in Canada's measure of "core inflation"?

The Bank of Canada chooses to influence interest rates directly rather than influencing the money supply directly because

Any central bank,including the Bank of Canada,can implement its monetary policy by directly influencing either ________ or ________,but not both.

It is widely accepted by economists that monetary policy is the most important determinant of a country's

During the financial crisis that began in 2008,the Bank of Canada took actions to increase the amount of reserves in the banking system.(They were "injecting liquidity.")However,the money supply (M2+)did not increase as predictably as it would have at other times.Why not?

High inflation is costly to firms and individuals.Of the following,who is most adversely affected by high inflation?