the economics of money, banking, and financial markets

533 #

© 2014 Pearson Canada Inc.#

17.7 Nonconventional Monetary Policy Tools During the Global Financial Crisis

1. 
   

   The purchase of financial assets by the central bank through the creation of excess reserves for
   banks is known as ____.
   A) quantitative easing
   B) conditional statements about the future path of the policy rate
   C) interest rate expectations
   D) credit easing
   Answer: A
   Diff: 3 Type: MC Page Ref: 425
   Skill: Recall
   Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
   policy

   
   


2. 
   

   Quantitative easing is regarded as an unconventional form of monetary policy because it
   targets the ____.
   A) the price of liquidity
   B) the overnight interest rate
   C) the amount of liquidity provided by the central bank instead of targeting the price of liquidity
   D) settlement balances
   Answer: C
   Diff: 3 Type: MC Page Ref: 425
   Skill: Recall
   Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
   policy

   
   


3. 
   

   Quantitative easing is regarded as ____.
   A) the price of liquidity
   B) a high-risk monetary policy tool
   C) a low-risk monetary policy tool
   D) a desired policy
   Answer: B
   Diff: 3 Type: MC Page Ref: 451
   Skill: Recall
   Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
   policy

   
   


4. 
   

   Quantitative easing is a high-risk monetary policy tool as it runs the risk of ____.
   A) possibly creating deflation
   B) possibly creating inflation and even hyperinflation
   C) having no effect
   D) having very short-term effects
   Answer: B
   Diff: 3 Type: MC Page Ref: 425
   Skill: Recall
   Objective List: 17.3 Identify the Bank of Canada's approach to monetary policy and the tools of
   policy