the economics of money, banking, and financial markets

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Economics of Money, Banking & Financial Markets, 5e (Mishkin)
Chapter 23 The Monetary Policy and Aggregate Demand Curves

23.1 The Bank of Canada and Monetary Policy

1. 
   

   The Bank of Canada conducts monetary policy by ____.
   A) setting the overnight interest rate
   B) buying and selling bonds in open market operations
   C) changing the tax rate to influence aggregate demand
   D) changing the exchange rate to influence aggregate demand
   Answer: A
   Diff: 2 Type: MC Page Ref: 558
   Skill: Recall
   Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
   the interest rate

   
   


2. 
   

   The Bank of Canada controls the overnight rate by ____.
   A) varying the settlement balances it provides to the banking system
   B) dictating terms of the LVTS
   C) managing government savings
   D) borrowing from the provincial government
   Answer: A
   Diff: 2 Type: MC Page Ref: 558
   Skill: Recall
   Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
   the interest rate

   
   


3. 
   

   Because prices are slow to move in the short-run, when the Bank of Canada lowers the
   overnight rate, ____.
   A) nominal interest rates rise
   B) real interest rates fall
   C) inflation falls
   D) real interest rates rise
   Answer: B
   Diff: 2 Type: MC Page Ref: 558
   Skill: Recall
   Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
   the interest rate