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© 2014 Pearson Canada Inc.#17.5 Settlement Balances Management
In addition to targeting the overnight interest rate at the mid-point of the operating band, the
Bank of Canada also targets ____.
A) the prime rate
B) the level of settlement balances
C) the treasury bill rate
D) the money multiplier
Answer: B
Diff: 2 Type: MC Page Ref: 417
Skill: Recall
Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
policy
If government deposits at the Bank of Canada are predicted to increase, the manager of the
trading desk at the Bank will likely conduct activities to ____ reserves.
A) inject
B) drain
C) reverse
D) flood
Answer: A
Diff: 2 Type: MC Page Ref: 418
Skill: Recall
Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
policy
The target for settlement balances is set at ____.
A) zero with no adjustments for any pressures on the overnight rate
B) zero but the Bank makes adjustments depending on pressures on the overnight rate
C) zero but the Bank makes adjustments depending on pressures on the prime rate
D) always positive with no adjustments
Answer: B
Diff: 2 Type: MC Page Ref: 417
Skill: Recall
Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
policy
The Bank of Canada neutralizes special PRA operations so as to ____.
A) not to leave the system in a surplus position at the end of the day
B) to leave the system in a surplus position at the end of the day
C) to leave the system changed at the end of the day
D) as to leave the system in a deficit position at the end of the day
Answer: A
Diff: 2 Type: MC Page Ref: 417
Skill: Recall
Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
policy