Question 1

When most people expect inflation their expectations come true.

Accepted Answer

A) True 
 B)False  True

Question 2

The only Governor of the Bank of Canada who was forced to resign was

Accepted Answer

A)  Crow. 
B)  Towers. 
C)  Coyne. 
D)  Carney. 
E)  Theissen. 
A)  Crow. 
B)  Towers. 
C)  Coyne. 
D)  Carney. 
E)  Theissen. C

Question 3

The "Yes - Markets Self-Adjust" camp favours leaving the driving of monetary policy to the government.

Accepted Answer

A) True 
 B)False  False

Question 4

The prime rate equals the overnight rate plus 2 percent.

Accepted Answer

A) True 
 B)False

Question 5

Lower interest rates work like a brake to slow down the economy.

Accepted Answer

A) True 
 B)False

Question 6

The domestic transmission mechanism works through the effect of interest rates on interest-sensitive spending.

Accepted Answer

A) True 
 B)False

Question 7

Higher interest rates decrease real GDP and increase inflation.

Accepted Answer

A) True 
 B)False

Question 8

When the Bank of Canada raises interest rates, this

Accepted Answer

A)  increases unemployment and decreases inflation. 
B)  decreases unemployment and decreases inflation. 
C)  decreases unemployment but creates stagflation. 
D)  increases unemployment and increases inflation. 
E)  decreases unemployment and increases inflation. 
A)  increases unemployment and decreases inflation. 
B)  decreases unemployment and decreases inflation. 
C)  decreases unemployment but creates stagflation. 
D)  increases unemployment and increases inflation. 
E)  decreases unemployment and increases inflation.

Question 9

When the Bank of Canada buys bonds on the bond market, the

Accepted Answer

A)  demand for bonds increases. 
B)  demand for bonds decreases. 
C)  supply of bonds increases. 
D)  supply of bonds decreases. 
E)  supply of money decreases. 
A)  demand for bonds increases. 
B)  demand for bonds decreases. 
C)  supply of bonds increases. 
D)  supply of bonds decreases. 
E)  supply of money decreases.

Question 10

In dealing with an inflationary gap 18 to 24 months in the future, monetary policy is like "taking away the punch bowl just when the party is getting started."

Accepted Answer

A) True 
 B)False

Question 11

Higher interest rates work like an accelerator to speed up the economy.

Accepted Answer

A) True 
 B)False

Question 12

To increase aggregate demand, the Bank of Canada

Accepted Answer

A)  sells bonds, decreasing chartered bank reserves, decreasing lending, and lowering the overnight rate. 
B)  sells bonds, decreasing chartered bank reserves, decreasing lending, and raising the overnight rate. 
C)  sells bonds, decreasing chartered bank reserves, increasing lending, and raising the overnight rate. 
D)  buys bonds, increasing chartered bank reserves, increasing lending, and lowering the overnight rate. 
E)  buys bonds, increasing chartered bank reserves, increasing lending, and raising the overnight rate. 
A)  sells bonds, decreasing chartered bank reserves, decreasing lending, and lowering the overnight rate. 
B)  sells bonds, decreasing chartered bank reserves, decreasing lending, and raising the overnight rate. 
C)  sells bonds, decreasing chartered bank reserves, increasing lending, and raising the overnight rate. 
D)  buys bonds, increasing chartered bank reserves, increasing lending, and lowering the overnight rate. 
E)  buys bonds, increasing chartered bank reserves, increasing lending, and raising the overnight rate.

Question 13

An appreciating Canadian dollar is a negative aggregate demand shock.

Accepted Answer

A) True 
 B)False

Question 14

Which statement about interest rates is true?

Accepted Answer

A)  The prime rate equals the overnight rate plus 2 percent. 
B)  Long-run interest rates tend to be lower than short-run interest rates. 
C)  Short-run bonds tend to be riskier than long-run bonds. 
D)  Investors require a higher reward for bonds with more liquidity. 
E)  Long-run interest rates fluctuate more than short-run interest rates. 
A)  The prime rate equals the overnight rate plus 2 percent. 
B)  Long-run interest rates tend to be lower than short-run interest rates. 
C)  Short-run bonds tend to be riskier than long-run bonds. 
D)  Investors require a higher reward for bonds with more liquidity. 
E)  Long-run interest rates fluctuate more than short-run interest rates.

Question 15

If the annual inflation rate is 0.5 percent, the Bank of Canada will

Accepted Answer

A)  sell bonds to raise interest rates and slow down the economy. 
B)  buy bonds to lower interest rates and accelerate the economy. 
C)  do nothing since an inflation rate of 0.5 percent is desirable. 
D)  buy bonds to raise interest rates and increase aggregate demand. 
E)  sell bonds to lower interest rates and increase aggregate demand. 
A)  sell bonds to raise interest rates and slow down the economy. 
B)  buy bonds to lower interest rates and accelerate the economy. 
C)  do nothing since an inflation rate of 0.5 percent is desirable. 
D)  buy bonds to raise interest rates and increase aggregate demand. 
E)  sell bonds to lower interest rates and increase aggregate demand.

Question 16

Accommodating a negative supply shock with monetary policy to accelerate the economy causes stagflation.

Accepted Answer

A) True 
 B)False

Question 17

During a balance sheet recession, businesses focus on

Accepted Answer

A)  investment spending. 
B)  buying assets. 
C)  reducing debt. 
D)  maximizing profits. 
E)  maximizing sales. 
A)  investment spending. 
B)  buying assets. 
C)  reducing debt. 
D)  maximizing profits. 
E)  maximizing sales.

Question 18

Long-run interest rates tend to be higher and less volatile than short-run interest rates.

Accepted Answer

A) True 
 B)False

Question 19

Changing inflation expectations eliminated the original Phillips Curve tradeoff between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 20

Monetary policy to accelerate the economy by lowering interest rates is often politically unpopular.

Accepted Answer

A) True 
 B)False

When most people expect inflation their expectations come true.

The only Governor of the Bank of Canada who was forced to resign was

The "Yes - Markets Self-Adjust" camp favours leaving the driving of monetary policy to the government.

The prime rate equals the overnight rate plus 2 percent.

Lower interest rates work like a brake to slow down the economy.

The domestic transmission mechanism works through the effect of interest rates on interest-sensitive spending.

Higher interest rates decrease real GDP and increase inflation.

When the Bank of Canada raises interest rates, this

When the Bank of Canada buys bonds on the bond market, the

In dealing with an inflationary gap 18 to 24 months in the future, monetary policy is like "taking away the punch bowl just when the party is getting started."

Higher interest rates work like an accelerator to speed up the economy.

To increase aggregate demand, the Bank of Canada

An appreciating Canadian dollar is a negative aggregate demand shock.

Which statement about interest rates is true?

If the annual inflation rate is 0.5 percent, the Bank of Canada will

Accommodating a negative supply shock with monetary policy to accelerate the economy causes stagflation.

During a balance sheet recession, businesses focus on

Long-run interest rates tend to be higher and less volatile than short-run interest rates.

Changing inflation expectations eliminated the original Phillips Curve tradeoff between inflation and unemployment.

Monetary policy to accelerate the economy by lowering interest rates is often politically unpopular.

Whats in Economics for You Scarcity, Opportunity Cost, Trade, and Models

Making Smart Choices: the Law of Demand

Show Me the Money: the Law of Supply

Coordinating Smart Choices: Demand and Supply

Are Your Smart Choices Smart for All Macroeconomics and Microeconomics

Up Around the Circular Flow: Gdp, Economic Growth, and Business Cycles

Costs of Not Working and Living: Unemployment and Inflation

Skating to Where the Puck Is Going: Aggregate Supply and Aggregate Demand

Money Is for Lunatics: Demanders and Suppliers of Money

Trading Dollars for Dollars Exchange Rates and Payments With the Rest of the World

Spending Others Money: Fiscal Policy, Deficits, and National Debt

Are Sweatshops All Bad Globalization and Trade Policy

Filters

Exam 11: Steering Blindly Monetary Policy and the Bank of Canada

When most people expect inflation their expectations come true.

The only Governor of the Bank of Canada who was forced to resign was

The "Yes - Markets Self-Adjust" camp favours leaving the driving of monetary policy to the government.

The prime rate equals the overnight rate plus 2 percent.

Lower interest rates work like a brake to slow down the economy.

The domestic transmission mechanism works through the effect of interest rates on interest-sensitive spending.

Higher interest rates decrease real GDP and increase inflation.

When the Bank of Canada raises interest rates, this

When the Bank of Canada buys bonds on the bond market, the

In dealing with an inflationary gap 18 to 24 months in the future, monetary policy is like "taking away the punch bowl just when the party is getting started."

Higher interest rates work like an accelerator to speed up the economy.

To increase aggregate demand, the Bank of Canada

An appreciating Canadian dollar is a negative aggregate demand shock.

Which statement about interest rates is true?

If the annual inflation rate is 0.5 percent, the Bank of Canada will

Accommodating a negative supply shock with monetary policy to accelerate the economy causes stagflation.

During a balance sheet recession, businesses focus on

Long-run interest rates tend to be higher and less volatile than short-run interest rates.

Changing inflation expectations eliminated the original Phillips Curve tradeoff between inflation and unemployment.

Monetary policy to accelerate the economy by lowering interest rates is often politically unpopular.

Whats in Economics for You Scarcity, Opportunity Cost, Trade, and Models

Making Smart Choices: the Law of Demand

Show Me the Money: the Law of Supply

Coordinating Smart Choices: Demand and Supply

Are Your Smart Choices Smart for All Macroeconomics and Microeconomics

Up Around the Circular Flow: Gdp, Economic Growth, and Business Cycles

Costs of Not Working and Living: Unemployment and Inflation

Skating to Where the Puck Is Going: Aggregate Supply and Aggregate Demand

Money Is for Lunatics: Demanders and Suppliers of Money

Trading Dollars for Dollars Exchange Rates and Payments With the Rest of the World

Spending Others Money: Fiscal Policy, Deficits, and National Debt

Are Sweatshops All Bad Globalization and Trade Policy

Filters