Question :
31) If the Bank of Canada wants to influence real : 1384468
31) If the Bank of Canada wants to influence real economic variables in the short run, it uses
A) policy instruments such as the exchange rate and investment to influence the economy.
B) its only policy instrument—the overnight interest rate target—to influence aggregate demand.
C) policy variables such as the exchange rate and investment to influence aggregate demand.
D) policy variables such as open-market operations to influence aggregate demand.
E) policy variables such as the money supply to influence investment and aggregate supply.
32) The overnight interest rate is crucial to the Bank of Canada when it implements its monetary policy because
A) the Bank of Canada’s first priority is to ensure the solvency of commercial banks.
B) its changes in the overnight interest rate generally lead to changes in longer-term interest rates.
C) overnight loans constitute a major source for open-market operations.
D) the Bank of Canada has no ability to influence other interest rates.
E) it is the result of the Bank of Canada’s regular changes in the money supply.
33) Suppose the Bank of Canada announces its target for the overnight interest rate at 2.75%. What is the Bank’s target range for the overnight interest rate?
A) 1.75 – 3.75%
B) 2.25 – 3.25%
C) 2.5 – 3.00%
D) 2.7 – 2.8%
E) 2.74 – 2.76%
34) 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?
A) Because the Bank of Canada Act requires that commercial banks borrow from each other at a rate no higher than 0.25% above the target rate.
B) Because commercial banks know that they can borrow from the Bank of Canada at 3.00%, and lend to the Bank at 2.50% so the rate they charge each other will stay within that range.
C) Because the Bank of Canada chooses its target rate based on the anticipated borrowing needs of the commercial banks.
D) Because it is not legal for commercial banks to transact between each other at any rate outside of the Bank of Canada’s target range.
E) Because commercial banks face regulatory obstacles if they borrow from each other at any rate outside of the Bank of Canada’s target range.
35) How does the Bank of Canada communicate its target for the overnight interest rate to the public?
A) monthly announcements at fixed announcement dates (FADs)
B) in its quarterly publication “Monetary Policy Report”
C) announcements made 8 times per year at pre-specified fixed announcement dates (FADs)
D) the target is communicated to the minister of finance for approval and then released to the public on a quarterly basis
E) the target is communicated to the Prime Minister for approval and then released to the public at 8 pre-specified fixed announcement dates (FADs)
36) In Canada, open-market operations are
A) government actions aimed at creating competition within the banking industry.
B) loans made by the Bank of Canada to the commercial banks.
C) conducted to enforce the reserve requirements of commercial banks.
D) no longer carried out.
E) the buying and selling of government securities by the Bank of Canada.
37) The Bank of Canada’s purchases and sales of government securities, when they occur, are referred to as
A) increases and decreases in government expenditure.
B) margin requirements.
C) open-market operations.
D) reserve requirements.
E) the setting of the bank rate.
38) If the Bank of Canada chooses to expand the money supply directly, it could
A) sell government securities on the open market.
B) sell some of its foreign currency assets.
C) reduce its deposits at commercial banks.
D) buy government securities on the open market.
E) change the price level.
39) When the Bank of Canada enters the open market and buys or sells government securities, we refer to this as
A) monetary policy.
B) commercial lending.
C) changing the target reserve ratio.
D) setting the target ratio.
E) open-market operations.
40) The Bank of Canada conducts its open-market operations directly in response to
A) changes in aggregate demand.
B) orders from Parliament.
C) its announced changes in the money supply.
D) changes in the price level.
E) the changing demand for cash reserves from the commercial banks.
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