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During the 1975-1981 period, the Bank of Canada decided to target the growth rate of M1
because it ____.
A) was the most prominent measure of money
B) had a stable demand
C) had a predictable relationship with income and prices
D) All of the above.
Answer: D
Diff: 1 Type: MC Page Ref: 463 - 464
Skill: Applied
Objective List: 18.4 Outline Bank of Canada policy procedures from a historical perspective
During the 1975-1981 period, although the Bank of Canada was successful in keeping actual
M1 growth within the target range, ____.
A) the inflation rate by the end of the 1970s was almost at the same level as when monetary
gradualism was introduced in 1975
B) the inflation rate remained high
C) the demand for M1 became unstable
D) All of the above.
Answer: D
Diff: 1 Type: MC Page Ref: 464
Skill: Applied
Objective List: 18.4 Outline Bank of Canada policy procedures from a historical perspective
During the 1975-1981 period, although the Bank of Canada was successful in keeping actual
M1 growth within the target range, ____.
A) the inflation rate by the end of the 1970s was almost at the same level as when monetary
gradualism was introduced in 1975
B) a series of financial innovations motivated individuals and firms to substitute out of M1 and
into M2
C) the growth rate of M2 increased
D) All of the above.
Answer: D
Diff: 1 Type: MC Page Ref: 464
Skill: Applied
Objective List: 18.4 Outline Bank of Canada policy procedures from a historical perspective
When interest rates in the United States increased sharply in late 1979, the Bank of Canada
responded by an extremely restrictive monetary policy to ____.
A) resist depreciation of the Canadian dollar
B) resist the possible inflationary shock from import prices
C) Both A and B of the above.
D) None of the above.
Answer: C
Diff: 1 Type: MC Page Ref: 464 - 465
Skill: Applied
Objective List: 18.4 Outline Bank of Canada policy procedures from a historical perspective