Exam 15: Part B: Interest Rates and Monetary Policy

In the cause-effect chain, a restrictive monetary policy increases the money supply, decreases the interest rate, increases investment spending, and increases aggregate demand.

Which of the following will not happen when the Bank of Canada buys bonds from the public in the open market?

The Bank of Canada:

Monetary policy is:

An important routine function of the Bank of Canada is:

The following is a simplified consolidated balance sheet for the chartered banking system and the Bank of Canada.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, suppose the Bank of Canada sells $2 in securities directly to the chartered banks.As a result of this transaction, the supply of money:

Most economists feel that changes in the interest rate are more likely to affect investment spending than consumer spending.

A restrictive monetary policy invoked to reduce inflation is compatible with the goal of correcting a trade deficit.

In the consolidated balance sheet of the Bank of Canada, chartered bank reserves held by the Bank of Canada are:

The interest rate at which the Bank of Canada lends to chartered banks is called:

A headline reads: " Bank of Canada cut the overnight lending rate by half a point." This suggests that:

Recently, the Bank of Canada has communicated changes in its monetary policy by announcing changes in its policy targets for the:

Assume that the Bank of Canada's policy is to keep the price level from either rising or falling.If aggregate supply increases in the economy, the Bank of Canada:

Which of the following is an asset on the balance sheet of the Bank of Canada?

The purpose of an expansionary monetary policy is to shift the:

If the quantity of money demanded exceeds the quantity supplied:

Other things equal, an expansionary monetary policy will:

To reduce the overnight lending rate, the Bank of Canada can:

An expansionary monetary policy may be frustrated if the:

A fundamental policy dilemma facing the monetary authorities is that: