Exam 28: Monetary Policy in Canada

Suppose the Bank of Canada's announced target for the overnight interest rate is 2.75%.Why should we expect commercial banks to borrow and lend overnight funds at a rate very close to this target?

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

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

Time lags in the conduct of monetary policy can cause

In an effort to maintain inflation at its targeted level the Bank of Canada designs its policies,in the short run,to

Most central banks,including the Bank of Canada,implement monetary policy by

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

Suppose the Canadian economy had an inflationary gap.To decrease the level of aggregate desired investment,the Bank of Canada could

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

In 1980,the annual inflation rate in Canada was

The Bank of Canada's formal policy target is ________.It's current target is to keep the annual inflation rate close to ________%.

The Bank of Canada initially implements a contractionary monetary policy by

To reduce short-term market interest rates,the Bank of Canada could

Suppose Canadian real GDP is currently equal to potential GDP.Then the Canadian dollar depreciates due to the reduced demand by European producers to purchase Canadian-made raw materials.If the Bank of Canada is committed to its inflation target then it should

The long-run target currently used by the Bank of Canada is to set

It might take a while before the effects of changes in monetary policy are realized in the economy because it takes a while for

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.If the Bank of Canada's goal is to increase the target interest rate from 2% to 3%,then the most effective approach is to

If we observe that short-term market interest rates have fallen,we can certainly conclude that the

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

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