Question :
91) Most economists now accept the proposition that
A) an ideal : 1384474
91) Most economists now accept the proposition that
A) an ideal monetary policy would allow the money supply to grow at a constant rate.
B) to reduce the long-run rate of inflation there must be a sustained monetary contraction.
C) monetary policy leaves real GDP and the overnight lending rate unaffected in the short run.
D) lowering the Bank Rate will have no effect on desired investment in the short run but will have a direct effect on core inflation.
E) monetary policy is the only policy tool available for influencing aggregate demand.
92) Suppose Canadian real GDP is currently equal to potential GDP. Then, because of events elsewhere in the world, European investors decide to hold fewer Canadian financial assets, which leads to a sustained depreciation of the Canadian dollar. If the Bank of Canada is committed to its inflation target then it should
A) implement an expansionary monetary policy by increasing its target for the overnight interest rate.
B) implement an expansionary monetary policy by decreasing its target for the overnight interest rate.
C) not intervene in the economy at all since this shock will not have any real effects in the short run.
D) implement a contractionary monetary policy by increasing its target for the overnight interest rate.
E) implement a contractionary monetary policy by decreasing its target for the overnight interest rate.
93) 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
A) implement an expansionary monetary policy by increasing its target for the overnight interest rate.
B) implement an expansionary monetary policy by decreasing its target for the overnight interest rate.
C) not intervene in the economy at all since this shock will not have any real effects in the short run.
D) implement a contractionary monetary policy by increasing its target for the overnight interest rate.
E) implement a contractionary monetary policy by decreasing its target for the overnight interest rate.
94) Which of the following events would justify the Bank of Canada implementing an expansionary monetary policy, while maintaining its commitment to its inflation target?
A) The appreciation of the Canadian dollar due to increases in the world prices of Canadian exports.
B) The depreciation of the Canadian dollar due to persistent current account deficits of Canada.
C) The OPEC oil-price shocks that result in inflation.
D) The U.S. economy increasing its demand for Canadian goods and services.
E) The stock market crash following the terrorist attacks on September 11, 2001.
95) Suppose Canadian real GDP is equal to potential GDP. An appreciation of the Canadian dollar then implies that the Bank of Canada should engage in
A) a loosening of monetary policy because of the excess demand for Canadian products that is creating the appreciation.
B) a tightening of monetary policy because of the excess demand for Canadian products that is creating the appreciation.
C) no change in monetary policy because the exchange rate is always allowed to float freely.
D) an increase in inflation because of the higher cost of imports.
E) either a contractionary or an expansionary policy, depending on the cause of the appreciation.
96) Suppose Canadian real GDP is equal to potential GDP. A significant and sustained appreciation of the Canadian dollar on the foreign-exchange market then requires the Bank of Canada to
A) engage in expansionary monetary policy to counter the rise in the dollar.
B) engage in contractionary monetary policy to counter the rise in the dollar.
C) identify the cause of the change in the exchange rate before taking any action to adjust policy.
D) increase the target band for the inflation rate.
E) increase the target band for the overnight lending rate.
97) Suppose Canadian real GDP is equal to potential GDP. A significant and sustained appreciation of the Canadian dollar would likely lead the Bank to engage in a contractionary monetary policy if the Bank’s policy experts traced the cause of the appreciation to
A) a decrease in the overnight lending rate.
B) an increase in the desire of non-residents to purchase Canadian financial assets.
C) an increase in the desire of non-residents to purchase more Canadian goods and services.
D) a reduction in Canada’s core inflation rate.
E) a recession in Canada.
98) Suppose Canadian real GDP is equal to potential GDP. A significant and sustained appreciation of the Canadian dollar would likely lead the Bank to engage in an expansionary monetary policy if the Bank’s policy experts traced the cause of the appreciation to
A) a decrease in the overnight lending rate.
B) an increase in the desire of non-residents to purchase Canadian financial assets.
C) an increase in the desire of non-residents to purchase more Canadian goods and services.
D) a reduction in Canada’s core inflation rate.
E) a recession in Canada.
99) Time lags in monetary policy can cause
A) monetary policy to work in the opposite direction to what was initially predicted by economists.
B) an expansionary policy to have a smaller effect than what was expected by policymakers.
C) monetary expansions to work very quickly but cause monetary contractions to work very slowly.
D) difficulty in the timing of appropriate policy and can even lead to destabilization.
E) short-term monetary policy to work more effectively than long-term targeting.
100) Economists at the Bank of Canada estimate that time lags in monetary policy imply that
A) monetary policy is totally ineffective in changing overnight lending rates in the short run.
B) monetary policy is totally ineffective in changing core inflation rates in the long run.
C) monetary policy can cause changes in real GDP to occur in 9-12 months and changes in core inflation to occur in 18-24 months.
D) monetary policy can cause changes in core inflation to occur in 9-12 months and changes in the exchange rate to occur in 18-24 months.
E) monetary policy can cause changes in core inflation to occur in 9 to 12 months and changes in real GDP to occur in 18-24 months.
