Exam 15: Part B: Interest Rates and Monetary Policy

The asset demand for money:

An expansionary monetary policy may be more effective than a restrictive monetary policy because chartered banks may decide to hold a large quantity of excess reserves.

An increase in nominal GDP increases the demand for money because:

It is assumed that households and businesses want to hold for transactions purposes an amount of money equal to one-half of the GDP.The table shows the amounts of money that households and businesses want to hold as an asset at various interest rates. Refer to the information above.If the GDP is $200 and the interest rate is 6, what total amount of money will households and businesses want to hold?

The most important day-to-day monetary instrument that the Bank of Canada uses to achieve the desired interest rate and therefore the price stability is:

In which of the following instances can we be certain that the quantity of money demanded by the public will decrease?

Under some conditions, proper domestic monetary policy may be at odds with the goal of correcting a trade imbalance because:

Which of the following statements is not correct?

If the money GDP is $600 billion and, on the average, each dollar is spent three times per year, then the amount of money demanded for transactions purposes:

Net exports would most likely decrease when there is a(n):

Refer to the above market for money diagram.Given D_m and S_m, an interest rate of i₃ is not sustainable because:

Monetary policy is thought to be:

Which of the following is correct?

The largest single liability of the Bank of Canada is its outstanding advances to chartered banks.

A restrictive monetary policy in Canada is most likely to:

Which of the following statements is correct?

A disequilibrium in the market for money is mainly corrected via a change in:

Assume that a single chartered bank has no excess reserves and that the desired reserve ratio is 20 percent.If this bank sells a bond for $1,000 to the Bank of Canada, it can expand its loans by a maximum of:

Because of the liquidity trap, the Bank of Canada's creation of billions of dollars in excess reserves during the great recession had little or no effect on lending by the chartered banks.

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.The interest rate in the economy is 4 percent.Which of the following should the monetary authorities do to achieve a non-inflationary full-employment level of real GDP?