Question :
61) If we observe that short-term market interest rates have : 1384471
61) If we observe that short-term market interest rates have fallen, we can certainly conclude that the
A) Bank of Canada has implemented an expansionary monetary policy.
B) Bank of Canada has implemented a contractionary monetary policy.
C) Bank of Canada has abandoned its inflation target.
D) Government of Canada has reduced the money supply.
E) It is not possible to conclude any of the above.
62) The monetary transmission mechanism describes how changes in the the money market (possibly caused by monetary policy) cause changes in the interest rate, which then cause changes in
1) aggregate demand and real GDP;
2) desired investment and net exports;
3) the price level.
A) 1 only
B) 2 only
C) 3 only
D) 1 and 2
E) 1, 2, and 3
63) The Bank of Canada initially implements an expansionary monetary policy by
A) directly increasing the money supply.
B) selling government securities on the open market.
C) buying government securities on the open market.
D) reducing its target for the overnight interest rate.
E) raising its target for the overnight interest rate.
64) The Bank of Canada initially implements a contractionary monetary policy by
A) directly decreasing the money supply.
B) raising its target for the overnight interest rate.
C) selling government securities on the open market.
D) buying government securities on the open market.
E) reducing its target for the overnight interest rate.
65) Suppose the economy is experiencing an inflationary gap. Which of the following describes a likely policy response by the Bank of Canada?
A) A contractionary monetary policy which leads to a lower interest rate, reduced investment demand, and a shift to the left of the AD curve.
B) An expansionary monetary policy which leads to an increase in investment demand, and a shift to the right of the AD curve.
C) An expansionary monetary policy which leads to a decrease in investment demand, and a shift to the left of the AD curve.
D) A contractionary monetary policy which leads to an increase in investment demand, and a shift to the right of the AD curve.
E) A contractionary monetary policy which leads to a reduction in investment demand, and a shift to the left of the AD curve.
66) How does the Bank of Canada set in motion the monetary transmission mechanism?
A) by altering its target for the overnight interest rate
B) by altering the price level
C) by influencing the demand for money directly
D) by influencing the exchange rate directly
E) by influencing aggregate supply directly
67) Most central banks accept that, in the long run, monetary policy has an effect on
A) the level of aggregate demand.
B) the price level and the inflation rate only.
C) the level of investment demand.
D) all real economic variables.
E) real GDP and the price level.
68) Many central banks have established formal targets for the rate of inflation because of the following fundamental observations about economic relationships:
A) 1 only
B) 2 only
C) 3 only
D) 1 and 3 only
E) 1, 2, and 3
69) High inflation is costly to firms and individuals. Of the following, who is most adversely affected by high inflation?
A) a homeowner with a 25-year fixed-rate mortgage
B) a student with student loans repayable in nominal terms at a fixed rate of interest
C) a student with student loans repayable on an indexed basis at a variable rate of interest
D) a senior whose retirement income is an indexed pension plan
E) a senior whose retirement income is fixed in dollar terms
70) Which of the following describes the cause of a sustained inflation?
A) the monetary transmission mechanism
B) an aggregate demand shock significant enough to cause a substantial rise in the price level
C) continual monetary expansion
D) an aggregate supply shock significant enough to cause a substantial rise in the price level
E) simultaneous AD and AS shocks.
