Two Monetary Policy Instruments That the Bank of Canada Can
Two monetary policy instruments that the Bank of Canada can use are
A)the federal government budget balance and the real interest rate.
B)the quantity of Canadian dollars held in Canadian banks and the quantity fo Canadian dollars held by foreign central banks.
C)the monetary base and the short-term interest rate.
D)the foreign exchange rate and the government budget balance.
E)the current account balance and the capital and financial account balance.
Choose the statement that is incorrect.
A)The Bank of Canada's choice of monetary policy instrument is the overnight loans rate.
B)Although the Bank of Canada can change the overnight rate by any reasonable amount that it chooses, it normally changes the overnight rate by a single point at a time.
C)In recent years, the overnight loans rate has been at historically low levels.
D)Since late 2000, the Bank has established eight fixed dates on which it announces its overnight loans rate target for the coming period of approximately six weeks.
E)The Bank sometimes acts in an emergency between normal announcement dates.
If the Bank of Canada buys government bonds, all of the following happens except
A)bank reserves increase.
B)the quantity of money increases.
C)the supply of loanable funds increases.
D)the bank rate rises.
E)net exports increase.
Which of the following quotations correctly describes the impact of monetary policy on the economy?
A)"House sales are down lots, due to the higher money growth."
B)"The extra money pumped into the economy by the central bank is creating less exports."
C)"The tightening of money growth is helping sell goods abroad."
D)"Businesses are investing more, now that monetary policy has become less expansionary."
E)"The extra money pumped into the economy by the central bank is creating more jobs."