Exam 15: Part B: Interest Rates and Monetary Policy

Other things being equal, monetary policy will be more effective the flatter the investment-demand curve.

When a chartered bank borrows from the Bank of Canada:

The reason for the Bank of Canada to have a range for its inflation targeting is that some of the components of the CPI, fluctuate a lot.

A restrictive monetary policy reduces investment spending and shifts the economy's aggregate demand curve to the right.

Refer to the above table.Suppose the transactions demand for money is $300 billion and the money supply is $700 billion.A decrease in the money supply to $600 billion would cause the interest rate to:

Refer to the diagram below for the market for money.Other things equal, the money demand curve in the diagram would shift leftward if:

All else equal, when the Bank of Canada engages in a restrictive monetary policy, the price of government securities tends to:

Refer to the graphs below.The first graph shows the money market of an economy, and the second graph shows the market for goods and services in the economy. In the above diagrams, the numbers in the parentheses after the AD₁, AD₂, and AD₃ labels indicate the levels of investment spending associated with each AD curve.All figures are in billions.Q_f is the full-employment level of real output.Suppose the economy is in equilibrium at point C on the aggregate demand curve.Which of the following should the monetary authorities pursue to achieve a non-inflationary full-employment level of real GDP?

By early 2008 it became evident that the Canadian economy was slowing along with the U.S., where housing bubble had created a financial crisis worldwide.The Bank of Canada's response to this crisis was:

Notes in circulation are:

Which of the following best describes the cause-effect chain of a restrictive monetary policy?

Refer to the above information.At equilibrium in the market for money, the total amount of money demanded is:

The asset demand for money varies directly with the interest rate.

Which of the following is correct?

The following information for a bond having no expiration date: bond price = $1,000; bond fixed annual interest payment = $100; bond annual interest rate = 10 percent.Refer to the above information.If the price of this bond falls by $200, the interest rate in effect will:

Refer to the above table.Suppose the transactions demand for money is equal to 20 percent of the nominal GDP, the supply of money is $800 billion, and the asset demand for money is that shown in the table.If the nominal GDP is $2000 billion, the equilibrium interest rate is:

In the consolidated balance sheet of the Bank of Canada, loans to chartered banks are:

The following are simplified consolidated balance sheets for the chartered banking system and the Bank of Canada.Do not cumulate your answers; that is, do return to the data given in the original balance sheets in answering each question.Assume a desired reserve ratio of 5 percent for the chartered banks.All figures are in billions of dollars.CONSOLIDATED BALANCE SHEET: CHARTERED BANKING SYSTEM BALANCE SHEET: BANK OF CANADA Refer to the above information.The chartered banks have excess reserves of:

The price of a bond having no expiration date is originally $8000 and has a fixed annual interest payment of $800.A fall in the price of the bond by $3,000 will provide a new buyer of the bond an interest rate of:

Refer to the above information.An increase in the money supply of $20 billion will cause the equilibrium interest rate to: