Question :
21) The term structure of interest rates refers to
A) the : 1384467
21) The term structure of interest rates refers to
A) the general observation that the yield on 30-year government bonds is less than the yield on 90-day Treasury bills.
B) the variance of the different interest rates available in the economy.
C) the composition of the market interest rate.
D) the variation of the market interest rate over the span of one year.
E) the pattern of interest rates that corresponds to the varying terms to maturity of government securities.
22) The interest rate that commercial banks charge each other for the shortest period of borrowing or lending is called the
A) term interest rate.
B) prime rate.
C) overnight interest rate.
D) bank rate.
E) preferred lending rate.
23) The interest rate that the Bank of Canada charges commercial banks for loans is called the
A) term interest rate.
B) prime rate.
C) overnight interest rate.
D) bank rate.
E) preferred lending rate.
24) Suppose the Bank of Canada announces its target for the overnight interest rate at 2.5%. In that case, the Bank of Canada is willing to lend to commercial banks at ________% and is willing to pay ________% on deposits it receives from commercial banks.
A) 2.25; 2.5
B) 2.5; 2.0
C) 2.5; 2.5
D) 2.75; 2.25
E) 3.5; 1.5
25) The Bank of Canada establishes a rate at which they will lend to commercial banks and a rate at which they will borrow from commercial banks. By doing so,
A) the Bank of Canada can ensure that the actual overnight interest rate will never fall below 2%.
B) the Bank of Canada can ensure that the commercial banks will not be earning excess profits.
C) the Bank of Canada can ensure that money demand remains at the level necessary for monetary equilibrium.
D) the Bank of Canada establishes a spread, into which all interest rates in the economy fall.
E) the Bank of Canada can ensure that the actual overnight interest rate will fall between these two interest rates.
26) Suppose the Bank of Canada lowers its target for the overnight interest rate and longer-term rates in the market fall as a result. Households’ and firms’ demand for new loans from the commercial banks would ________. In order to make the new loans, the commercial banks require more ________.
A) rise; government securities
B) fall; currency
C) rise; cash reserves
D) remain stable; excess reserves
E) fall; excess reserves
27) Suppose the Bank of Canada raises its target for the overnight interest rate and longer-term rates in the market rise as a result. Households’ and firms’ demand for loans from the commercial banks would ________. In order to accommodate this change, the commercial banks require ________.
A) rise; more government securities
B) fall; more cash reserves
C) rise; more currency
D) remain stable; no change to their reserves
E) fall; fewer cash reserves
28) Suppose the Bank of Canada lowers its target for the overnight interest rate and longer-term interest rates in the market fall as a result. When this occurs, the commercial banks respond to
A) an increase in the demand for loans by buying government securities from the Bank of Canada, against which they can extend new loans.
B) an increase in the demand for loans by selling government securities to the Bank of Canada in exchange for cash, with which they can extend new loans.
C) a decrease in the demand for loans by selling government securities to the Bank of Canada and calling in existing loans.
D) a decrease in the demand for loans by buying government securities from the Bank of Canada in exchange for cash, and calling in existing loans.
E) an increase in the demand for loans by borrowing cash from the Bank of Canada with which they can extend new loans.
29) Suppose the actual overnight interest rate is 3.5%. If the Bank of Canada raises its target for the overnight interest rate to 4%, and longer-term interest rates in the market rise as a result,
A) the demand for loans from commercial banks falls, the commercial banks sell government securities to the Bank of Canada, and the money supply falls.
B) the demand for loans from commercial banks rises, the commercial banks buy government securities from the Bank of Canada, and the money supply falls.
C) the demand for loans from commercial banks rises, the commercial banks sell government securities to the Bank of Canada, and the money supply rises.
D) the demand for loans from commercial banks falls, the commercial banks buy government securities from the Bank of Canada, and the money supply falls.
E) the demand for loans from commercial banks rises the commercial banks buy government securities from the Bank of Canada, and the money supply rises.
30) Suppose the actual overnight interest rate is 4%. If the Bank of Canada lowers its target for the overnight rate to 3.75%, the money supply will eventually
A) increase as a result of open-market operations.
B) increase as a result of an increase in excess reserves in the banking system.
C) decrease as a result of an increase in excess reserves in the banking system.
D) decrease as a result of open-market operations.
E) decrease as a result of a decrease in the demand for new loans.
