Question : 41) The amount of currency in circulation in the Canadian : 1384469

 

41) The amount of currency in circulation in the Canadian economy is described as being endogenous to the system. This is because

A) the process of deposit creation by the commercial banks is determined by the Bank of Canada.

B) the commercial banks determine the currency in circulation in response to the Bank of Canada’s changes to the money supply.

C) the Bank of Canada conducts its open-market operations in response to the changing demand for cash from the commercial banks.

D) the Bank of Canada targets the money supply directly.

E) the Bank of Canada targets the currency in circulation directly.

42) Suppose the Bank of Canada reduces its target for the overnight interest rate by 0.50 percentage points. In this situation, the Bank will likely need to accommodate the eventual resulting change in the demand for money by

A) increasing the supply of money by buying government securities on the open market.

B) increasing the supply of money by selling government securities on the open market.

C) decreasing the supply of money by buying government securities on the open market.

D) decreasing the supply of money by selling government securities on the open market.

E) maintaining the current supply of money which will increase the effectiveness of the change in the overnight interest rate.

43) Suppose the Bank of Canada increases its target for the overnight interest rate by 0.25 percentage points. In this situation, the Bank will likely need to accommodate the resulting change in the demand for money by

A) increasing the supply of money by buying government securities on the open market.

B) increasing the supply of money by selling government securities on the open market.

C) decreasing the supply of money by buying government securities on the open market.

D) decreasing the supply of money by selling government securities on the open market.

E) maintaining the current supply of money which will increase the effectiveness of the change in the overnight interest rate.

44) An expansionary monetary policy by the Bank of Canada could include

A) moral suasion to increase the commercial banks’ desired reserves.

B) moral suasion to reduce lending by commercial banks.

C) an open-market sale of government securities.

D) a reduction of the Bank’s target for the overnight interest rate.

E) None of the above would be expansionary.

45) An expansionary monetary policy would ________ and would eventually increase the money supply.

A) reduce short-term interest rates

B) involve selling foreign-currency reserves in the foreign-exchange market

C) involve selling government bonds on the open market

D) increase short-term interest rates

E) involve increasing the target for the overnight interest rate.

46) Suppose the Canadian economy had an inflationary gap. To decrease the level of aggregate desired investment, the Bank of Canada could

A) buy securities in the open market.

B) lower short-term interest rates.

C) reduce its spending.

D) raise its target for the overnight interest rate.

E) raise the price level.

47) Suppose the Canadian economy had a recessionary gap. To increase the level of desired aggregate expenditure, the Bank of Canada could

A) raise the bank rate.

B) increase its spending.

C) reduce the reserve requirements of the commercial banks.

D) sell securities in the open market.

E) reduce its target for the overnight interest rate.

48) The best description of the cause-and-effect chain of a contractionary monetary policy in the short run is that it will

A) lower the interest rate, increase investment spending, and increase real GDP.

B) raise the interest rate, decrease investment spending, and decrease real GDP.

C) lower the interest rate, lower investment spending, and decrease real GDP.

D) raise the interest rate, decrease investment spending, and increase real GDP.

E) raise the interest rate, increase investment spending, and decrease real GDP.

49) The best description of the cause-and-effect chain of an expansionary monetary policy is that it will

A) lower the interest rate, raise investment spending, and increase real GDP.

B) raise the interest rate, decrease investment spending, and increase real GDP.

C) raise the interest rate, increase investment spending, and increase real GDP.

D) lower the interest rate, increase investment spending, and reduce real GDP.

E) raise the interest rate, decrease investment spending, and decrease real GDP.

50) To remove an inflationary gap, the Bank of Canada would probably seek to

A) increase its target for the money supply.

B) decrease its target for the overnight interest rate.

C) increase its target for the overnight interest rate.

D) decrease the bank rate.

E) buy government securities through open-market operations.

 

 

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