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© 2014 Pearson Canada Inc.#
The Bank of Canada uses the ____ as its operating instrument.
A) nominal interest rate
B) real interest rate
C) open market operations
D) federal funds rate
Answer: A
Diff: 1 Type: MC Page Ref: 413
Skill: Recall
Objective List: 17.1 Characterize the framework for the implementation of monetary policy in
Canada
It is the ____ assumption of ____ that allows for the transmission between nominal
and real interest rates.
A) new Keynesian; sticky prices
B) monetarist; sticky prices
C) new Keynesian; perfect markets
D) Bank of Canada; chartered banks allegiance to Canadian monetary policy
Answer: A
Diff: 1 Type: MC Page Ref: 414
Skill: Recall
Objective List: 17.1 Characterize the framework for the implementation of monetary policy in
Canada
If the Bank of Canada expects the economy to to be exceeding its capacity, it ____ the
operating band for the overnight interest rate.
A) lowers
B) raises
C) leaves unchanged
D) stabilizes
Answer: B
Diff: 1 Type: MC Page Ref: 414
Skill: Recall
Objective List: 17.2 Explain the market for reserves and the channel/corridor system for setting
the overnight interest rate in Canada
To keep inflation from falling below the target range, the Bank of Canada ____.
A) decreases the target for the overnight rate which causes the dollar to go down
B) decreases the target for the overnight rate which causes the dollar to go up
C) increases the target for the overnight rate which causes the dollar to go down
D) increases the target for the overnight rate which causes the dollar to go up
Answer: A
Diff: 1 Type: MC Page Ref: 413
Skill: Recall
Objective List: 17.1 Characterize the framework for the implementation of monetary policy in
Canada