the economics of money, banking, and financial markets

710 $

© 2014 Pearson Canada Inc.$

9. 
   

   The reason inflation spiralled in Canada in the 1970s can be attributed to ____.
   A) the central bank not following the Taylor Principle
   B) the OPEC oil embargo
   C) changing policies at the federal government level
   D) an aggressive central bank policy buying bonds
   Answer: A
   Diff: 2 Type: MC Page Ref: 560
   Skill: Recall
   Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
   the interest rate

   
   


10. 
    

    In the 1970s , the inflation rate in Canada reach levels over ____ percent.
    A) 2
    B) 5
    C) 10
    D) 12
    Answer: C
    Diff: 2 Type: MC Page Ref: 560
    Skill: Recall
    Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
    the interest rate

    
    


11. 
    

    The Taylor Principle differs from the Taylor rule because ____.
    A) it does not provide a rule for how monetary policy should react to conditions in the economy
    B) the Taylor principle relates to real interest rates and the Taylor rule pertains to nominal
    interest rates
    C) the Taylor principle is exclusively used by the Bank of Canada while the Taylor rule is used
    by the U.S. Fed
    D) the Taylor rule relates to inflation rates while the Taylor principle is applied to real interest
    rates
    Answer: A
    Diff: 2 Type: MC Page Ref: 560
    Skill: Recall
    Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
    the interest rate

    
    


12. 
    

    Higher inflation results from higher interest rates due to ____.
    A) the Taylor principle
    B) the Taylor rule
    C) the slope of the monetary policy curve
    D) the Fisher equation
    Answer: A
    Diff: 2 Type: MC Page Ref: 560
    Skill: Recall
    Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
    the interest rate