Exam 28: Monetary Policy in Canada

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

The economic variables that the Bank of Canada tries to influence are ________ in the short run and ________ in the long run.

If we observe a small decrease in the actual overnight interest rate over a several-day period,we can definitely conclude that the

Suppose Canadian real GDP is equal to potential GDP.A significant and sustained appreciation of the Canadian dollar would likely lead the Bank to engage in an expansionary monetary policy if the Bankʹs policy experts traced the cause of the appreciation to

If we observe that the bank rate has fallen,we can conclude that the

The Bank of Canadaʹs formal policy target is ________. Itʹs current target is to keep the annual inflation rate close to ________%.

The decision by the Bank of Canada and many other central banks to target the rate of inflation partly reflects the evidence of the

Many central banks have established formal targets for the rate of inflation because of the following fundamental observations about economic relationships: 1.there are high costs associated with inflation 2.high inflation causes high unemployment 3.monetary policy is the cause of sustained inflation

To remove a recessionary gap,the Bank of Canada would probably seek to

Most central banks in the developed countries focus their attention on

In practice,the Bank of Canada uses monetary policy to reduce undesirable fluctuations in real GDP by

If the Bank of Canada chooses to expand M2 by exactly $1 million,it could do so by

In general,if a central bank chooses to target the money supply in its implementation of monetary policy,then

The best description of the cause-and-effect chain of an expansionary monetary policy is that it will

Suppose the actual overnight interest rate is 3.5%.If the Bank of Canada raises its target for the overnight interest rate to 4%,and longer-term interest rates in the market rise as a result,

Suppose the actual overnight interest rate is 4%.If the Bank of Canada lowers its target for the overnight rate to 3.75%,the money supply will eventually

If we observe a small increase in the actual overnight interest rate over a several-day period,we can definitely conclude that the

The best description of the cause-and-effect chain of a contractionary monetary policy in the short run is that it will

When the Bank of Canada increases the interest rate we call this a contractionary monetary policy.Why?

Given its existing policy regime of ʺinflation targeting,ʺ the Bank of Canada would likely react to a large positive aggregate demand shock by