Econ305 Chapter 16&17

Ace your homework & exams now with Quizwiz!

Hierarchical mandates ________. A) puts the goal of price stability first and then allows for other goals B) is only used by the Bank of Canada C) requires all goals to be met simultaneously D) is only used by the Federal Reserve

A

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________. A) 3.75 percent B) 3.25 percent C) 4 percent D) 3 percent

A

If the Bank of Canada wants to alleviate undesired downward pressure on the overnight financing rate it will enter into a ________. A) Reverse Repo B) Repurchase Agreement C) Swap D) Purchase and Resale Agreement

A

The Bank of Canada's operating band is ________ basis points or ________. A) 50; 0.5 percent B) 100; 10 percent C) 50; 5 percent D) 100; 1 percent

A

The lower limit of the operating band for the overnight interest rate is ________. A) 50 basis points below the bank rate B) the rate the Bank of Canada charges LVTS participants with negative settlement balances at the end of the banking day C) the bank rate D) the prime rate

A

The target for the overnight interest rate is also known as the ________. A) the policy rate B) the growth rate of M2 C) the bank rate D) reference rate

A

Which of the following is an advantage to inflation targeting? A) There is transparency. B) There is a delayed signal about achievement of the target. C) Inflation targets could impose a rigid rule on policymakers. D) There is potential for larger output fluctuations.

A

Which of the following is not an operating instrument? A) Bank rate B) Overnight funds interest rate C) Nonborrowed reserves D) Monetary base

A

45 basis points is equal to ________. A) 4.5 percent B) 0.45 percent C) 0.045 percent D) 45 percent

B

If the operating target of the Bank of Canada is 4 percent then the bank rate is ________. A) 4.50 percent B) 4.25 percent C) 4 percent D) 3.5 percent

B

In the long-run, there is no trade-off between ________ and ________. A) unemployment; economic growth B) inflation; unemployment C) inflation; price stability D) unemployment; price stability

B

Inflation targeting has the potential to reduce the likelihood that the central bank will fall into the time-inconsistency trap of trying to ________ output and employment in the short run by pursuing overly ________ monetary policy. A) expand; tight B) expand; expansionary C) lower; expansionary D) lower; tight

B

LVTS participants with positive settlement balances at the end of the day ________. A) are paid the bank rate B) are paid the bank rate less 50 basis points C) are paid the prime rate D) are paid the overnight rate

B

One of the Bank of Canada's most important roles is to be ________. A) the issuer of government debt B) a lender-of-last-resort C) a regulator of banks D) the Federal government's banker

B

Quantitative easing is a high-risk monetary policy tool as it runs the risk of ________. A) having very short-term effects B) possibly creating inflation and even hyperinflation C) possibly creating deflation D) having no effect

B

The European Central bank uses the ________ to signal its stance on monetary policy. A) overnight cash rate B) target financing rate C) overnight bank rate D) discount window

B

The difference between Term PRAs and special PRAs, is that term PRAs have ________. A) a term shorter than one business day, typically a term of 2 hours B) a term longer than one business day, typically a term of 28 business days C) a term longer than one business day, typically a term of 6 months D) a term longer than year, typically a term of 3 years

B

The goal of the Bank of Canada's current monetary policy is to keep the inflation rate within a target range of ________. A) 2 percent to 4 percent B) 1 percent to 3 percent C) 1 percent to 4 percent D) 2 percent to 3 percent

B

The nominal anchor ________. A) avoids the natural rate of unemployment B) acts like behavioural rule C) creates the time-inconsistency problem D) leads to inflation

B

The purchase of private sector assets by the central bank in critical markets is known as ________. A) quantitative easing B) credit easing C) conditional statements about the future path of the policy rate D) managing interest rate expectations

B

Which of the following criteria need not be satisfied for choosing an intermediate target? A) The variable must be controllable. B) The variable must be stable. C) The variable must be measurable. D) The variable must be predictable.

B

If the Bank of Canada wants to temporarily inject reserves in the banking system, it will engage in ________. _____ A) a reverse repurchase agreement B) a "swap" transaction C) a repurchase agreement D) None of the above.

C

SPRAs and SRAs are ________ open market operations. A) permanent B) risky C) temporary D) conducted 8 times a year

C

Special Purchase and Resale Agreements ________. A) relieve undesired downward pressure on the overnight interest rate B) alleviate undesired volatility in the overnight financing rate C) relieve undesired upward pressure on the overnight interest rate D) alleviate undesired downward pressure on the overnight financing rate

C

The Bank of Canada commitments regarding the operating band for the overnight interest rate to align market expectations of future short-term interest rates with those of the Bank are known as ________. A) interest rate expectations B) credit easing C) conditional statements about the future path of the policy rate D) quantitative easing

C

The importance of a nominal anchor is to ________. A) allow discretionary day-to-day monetary policy B) reduce inflation C) limit the time-inconsistency problem D) promote low inflation

C

The opportunity cost of holding excess reserves is ________. A) the prime rate B) the treasury bill rate C) the overnight rate D) the bank rate

C

The primary indicator of the Bank of Canada's stance on monetary policy is ________. A) the growth rate of the monetary base B) the bank rate C) the overnight rate D) the growth rate of M2

C

If LVTS participating financial institutions have insufficient settlement balances ________. A) they can borrow from the Bank of Canada B) they can borrow from each other in the pre-settlement trading period C) they can borrow from the Bank of Canada at the prime rate D) A and B only.

D

If the Bank of Canada expects the economy to slow down, it ________ the operating band for the overnight interest rate. A) stabilizes B) raises C) leaves unchanged D) lowers

D

If the operating band for the overnight interest rate is from 3.5 to 4.0 percent, then ________. A) the rate on positive settlement balances at the Bank of Canada is the lower limit of the operating band B) the rate on positive settlement balances at the Bank of Canada is 3.5 percent C) the bank rate is the lower limit of the operating band D) A and B only

D

In Canada, the market for settlement balances (reserves) is where ________. A) LIBOR is determined B) the federal funds rate is determined C) the discount rate is determined D) the overnight interest rate is determined

D

In the market for settlement balances, when the overnight interest rate is below the bank rate and above the bank rate less 50 basis points, the supply curve of reserves is ________. __ A) positively sloped B) negatively sloped C) horizontal D) vertical

D

Inflation targeting includes ________. A) an information-inclusive approach in which many variables are used in making decisions about monetary policy B) a public announcement of medium-term targets for inflation C) an institutional commitment to price stability as the primary long run goal D) all of the above

D

Interest rate stability is desirable because ________. A) it leads to financial market stability B) fluctuations in interest rates create uncertainty C) stability in the foreign exchange markets D) all of the above

D

Large Value Transfer System (LVTS) participants can make a payment only if they ________. A) have positive settlement balances in their accounts with the Bank of Canada B) have posted collateral (such as Government of Canada treasury bills and bonds) C) have explicit lines of credit with other participants D) All of the above

D

The Large Value Transfer System (LVTS) ________. A) is the core of the Canadian payments system B) is an electronic net settlement network designed to provide settlement to wholesale transactions C) is an electronic net settlement network designed to provide settlement to paper-based payment items D) A and B only.

D

The facility at which banks can borrow reserves from the Bank of Canada is called the ________. A) daily lending facility B) permanent lending facility C) temporary lending facility D) standing lending facility

D

Using Taylor's rule, when the equilibrium real overnight rate is 3 percent, the positive output gap is 2 percent, the target inflation rate is 1 percent, and the actual inflation rate is 2 percent, the nominal overnight rate target should be ________. A) 5 percent B) 5.5 percent C) 6 percent D) 6.5 percent

D

When the overnight rate is up to 50 basis points below the bank rate ________. A) the demand curve for settlement balances is vertical B) the supply curve of settlement balances has a positive slope C) the demand curve for settlement balances is horizontal D) the demand curve for settlement balances has a negative slope

D

According to the Taylor rule, the overnight interest rate should be set at ________. A) r - π B) r + π C) π - ior - 0.5(π - π* ) - 0.5(y - y) D) π + ior - 0.5(π - π *) - 0.5(y - y) E) none of the above

E


Related study sets

Computer Systems, Unit 2: Operating Systems and Networks

View Set

Chapter 19 Resources From The Sea

View Set

PrepU Chapter 46 Gastric & Duodenal Disorders (PUD)

View Set

Ch. 6 NCLEX Questions Foundations of Nursing

View Set

Chapter 69: Management of Patients With Neurologic Infections, Autoimmune Disorders, and Neuropathies

View Set