Chapter14

Advocates of Bank of Canada independence fear that subjecting the Bank to direct government control would ________. A) impart an anti-inflationary bias to monetary policy B) force monetary authorities to sacrifice the long-run objective of price stability C) make the so-called political business cycle even more pronounced D) B and C only.

D

Bank of Canada started operations in ________. A) 1945 B) 1915 C) 1925 D) 1935

D

Goal independence is the ability of ________ to set monetary policy ________. A) the central bank; instruments B) Congress; goals C) Congress; instruments D) the central bank; goals

D

The Board of Directors appoints the governor of the Bank of Canada for a renewable term of ________ years. 97) ______ A) eight B) seven C) five D) six

B

The purchase and sale of government securities by the Bank of Canada is known as ________. A) monetary base transactions B) open market buyback operations C) interbank borrowing D) repurchase agreements

B

Economist Stanley Fisher defined two types of independence of central banks: ________ and ________ independence. A) instrument; political B) parliamentary; decision C) instrument; goal D) policy; goal

C

In its responsibility for the government's operating accounts, the Bank of Canada ________. A) shifts balances between chartered banks B) manages foreign exchange transactions C) shifts balances between accounts at the Bank of Canada and the banks D) sells Canada Savings Bonds on behalf of the federal government

C

The Bank of Canada enjoys ________. A) goal independence B) political dependence C) instrument independence D) A and C only.

C

The Eurosystem has a structure like that of the ________. A) Bank of England B) Swiss National Bank C) Federal Reserve System D) Bank of Canada

C

The theory of bureaucratic behaviour suggests that the objective of a bureaucracy is to maximize ________. A) conflict with the executive and legislative branches of government B) profits C) its own welfare D) the public's welfare

C

In its role as provider of central banking services, the Bank of Canada holds deposit accounts of the ________. A) provincial governments B) directly clearing members of the Canadian Payments Association C) international organizations, such as the International Monetary Fund D) B and C only.

D

Increased operational independence by the Bank of Canada has also raised the standards for ________. A) misconduct B) confusion C) secrecy D) accountability

D

Regarding central bank independence, ________. A) the European Central Bank is more independent than the Fed B) the Fed is more independent than the European Central Bank C) the Bank of England has the longest tradition of independence of any central bank in the world D) the trend in industrialized nations has been to reduce central bank independence

A

The Bank of Canada serves as a lender of last ________ when a deposit-taking financial institution faces a ________crisis. A) resort; liquidity B) resort; profitability C) minute; liquidity D) minute; profitability

A

The Bank of Canada ultimate objective is ________. A) price stability B) low unemployment C) economic growth D) to keep interest rates low

A

The Bank of Canada quarterly Monetary Policy Report is published every ________, ________, ________ and ________. A) March; June; September; December B) January; April; July; October C) February; May; August; November D) January; February; August; December

B

Which of the following statements about central bank structure and independence are true? A) In recent years, with the exception of the Bank of England and the Bank of Japan, most countries have reduced the independence of their central banks, subjecting them to greater democratic control. B) Both theory and experience suggest that more independent central banks produce better monetary policy. C) Before the Bank of England was granted greater independence, the Federal Reserve was the most independent of the world's central banks. D) While the European Central Bank is independent, it is not as independent as the Federal Reserve.

B

Recent research indicates that inflation performance (low inflation) has been found to be best in countries with ________. A) money financing of budget deficits B) political control of monetary policy C) a policy of always keeping interest rates low D) the most independent central banks

D

The Bank of Canada's goal of low inflation is closely tied to ________. A) low interest rates B) price volatility C) growth in the money supply D) economic growth

D

The ability of a central bank to set monetary policy instruments is ________. A) policy independence B) goal independence C) political independence D) instrument independence

D

The benefit of the Ban k of Canada's role as the lender-of-last-resort include ________. A) easing liquidity problems of any financial institution B) deterring bank runs and panics C) reducing the monetary base to increase liquidity D) A and B only

D

The interest rate on loans of reserves from one bank to another is ________. A) the discount rate B) the bank rate C) the fed funds rate D) the overnight rate

D

The theory of bureaucratic behavior suggests that a consumer's behaviour is motivated by the ________. A) minimization of government intervention B) maximization social welfare C) minimization political pressure D) maximization of personal welfare

D

Under the current "joint responsibility system," ________. A) in the even of a serious policy conflict the minister of finance can issue a directive that the Bank of Canada must follow B) the Bank of Canada and the minister of finance consult regularly C) the Bank of Canada has full responsibility for monetary policy D) A and B only.

D

Which of the following are entities of the Eurosystem? A) The European Central Bank B) The central banks of the European Union countries that have adopted the euro C) The central banks of the euro area countries and of the European Union countries that have not yet adopted the euro D) A and B only

D

Which of the following are entities of the Federal Reserve System? A) Federal Reserve Banks B) The FOMC C) The Board of Advisors D) A and B only

D

Which of the following functions are not performed by the Bank of Canada in its role as the federal government's fiscal agent? A) Advising on federal government borrowings B) Managing new debt offerings by the federal government C) Servicing the federal government's outstanding debt D) Setting interest rates payable on time deposits

D

Which of the following is an element of the Bank of Canada? A) The Office of the Superintendent of Financial Institutions (OSFI) B) The Governing Council C) The Board of Directors D) B and C only

D

Which of the following statements concerning an independent central bank are true? A) Putting the Bank of Canada under control of the government may place too much pressure on the Bank to finance federal budget deficits, thereby imparting an inflationary bias to monetary policy. B) Politicians may prefer an independent central bank, as it can be used as a "whipping boy" or "scapegoat" for poor economic performance. C) Politicians in a democratic society may be shortsighted because of their desire to win reelection; thus, the political process may generate a political business cycle, in which just before an election expansionary policies are pursued to lower unemployment and interest rates. D) All of the above are true statements.

D