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Canadian Securities > Chap 5, Economic Policy > Flashcards

Chap 5, Economic Policy Flashcards

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SIE Exam flashcards
1
Q

Informs government decisions around the use of its spending and taxation power.

A

Fiscal Policy

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2
Q

A balancing act between taxation and spending.

A

Fiscal Policy

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3
Q

These gov’ts implement certain elements of fiscal policy

A

Federal and Provincial

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4
Q

Responsible for national defense, employment insurance, pension income for seniors and the disabled, veterans’ affairs, foreign affairs, and indigenous and northern affairs.

A

Federal Government

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5
Q

Responsible for health care, education, securities regulation, and various social services.

A

Provincial Government

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6
Q

The governments revenue comes primarily from different forms of ______

A

Taxation

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7
Q

Consists of accumulated past deficits minus accumulated past surpluses in the federal budget

A

National Debt

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8
Q

Governments finance deficits by issuing debt instruments such as ___ and ___ in the capital markets.

A

Bonds and T-bills

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9
Q

When the government borrows significantly from the capital markets, less capital remains for businesses to borrow. This effect is referred to as _____, and can have a negative impact on the economy.

A

Crowding Out

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10
Q

Comprises of 3 major components: government spending, consumer spending, and business spending and investment

A

GDP

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11
Q

Tells us what the government plans to do with respect to taxation and spending.

A

Federal Budget

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12
Q

Government spending on infrastructure can have a _____ effect on the whole economy.

A

Stimulating

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13
Q

If the government wants to stimulate the economy, it can ____ personal taxes.

A

Lower

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14
Q

As with spending, the government may _____ taxation to lower inflation, making it more difficult for consumers and businesses to spend.

A

Increase

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15
Q

The nation’s central bank

A

Bank of Canada

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16
Q

Responsible for the affairs of the Bank of Canada

A

Governing Council

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17
Q

The Governing Council is composed of

A

The governor, the senior deputy governor, and four deputy governors.

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18
Q

The main role of the __________ is “to promote the economic and financial welfare of Canada”

A

Bank of Canada

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19
Q

The Bank’s four main areas of responsibility:

A

Monetary Policy, The Canadian Financial System, Physical Currency, Funds Management

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20
Q

Oversees the main clearing and settlement systems.

A

The Bank of Canada

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21
Q

The ultimate source of liquidity in the financial system and referred to as the lender of last resort.

A

Bank of Canada

22
Q

Responsible for designing, printing, and distributing Canadian dollars

A

Bank of Canada

23
Q

The fiscal agent for the government of Canada

A

Bank of Canada

24
Q

Manages the governments foreign currency reserves

A

Bank of Canada

25
Q

Manages the governments federal debt, which consists mostly of T-bills and marketable bonds.

A

Bank of Canada

26
Q

Provides advice to the federal government regarding what debt can be issued, at what interest rate, and for what term, based on its assessment of the capital markets

A

Bank of Canada

27
Q

The goal of __________ is to preserve the value of money by keeping inflation low, stable, and predictable.

A

Monetary Policy

28
Q

Since 1991, the Bank has acted to keep inflation between ___ and ___ by using inflation-control targets

A

1% and 3%

29
Q

The Bank’s key monetary policy tools are _____ and _____

A

Interest rates and the money supply.

30
Q

The Bank can influence interest rates and the money supply through the following means:

A

Target overnight rate, Open market operations, Drawdowns and Redeposits

31
Q

The most important monetary policy tool the Bank uses

A

Target overnight rate

32
Q

The overnight rate operates within an operating band that is ____ basis points wide.

A

50

33
Q

50 basis points are equal to ___ %

A

.5%

34
Q

The Bank Rate is the ____ ____ of the operating band

A

Upper Limit

35
Q

The Bank announces whether or not it will change the target rate on _____ pre-set fixed dates during the year.

A

8

36
Q

The two main Open Market Operations that the Bank uses to conduct monetary policy are ____________ and ___________

A

Special Purchase and Resale Agreements (SPRA) and Sale and Repurchase Agreements (SRA)

37
Q

________ are used by the Bank when it wants to push interest rates down. (SPRA) or (SRA)

A

Special Purchase and Resale Agreements (SPRAs)

38
Q

Open Market operation used to increase the interest rate.

A

Sale and Repurchase Agreements (SRAs)

39
Q

Each day, billions of dollars flow through Canada’s financial system to settle transactions between major financial institutions. These transactions include cheques, wire transfers, direct deposits, pre-authorized debits, and bill payments.
To facilitate the transfer of these payments, the Bank established the ___________ in 1991

A

Large Value Transfer System (LVTS)

40
Q

This system allows participating financial institutions to conduct large transactions with each other through an electronic wire system.

A

Large Value Transfer System

41
Q

Helps to ensure that trading in the overnight market stays within the Bank’s 50-basis-point operating target.

A

Large Value Transfer System

42
Q

A ______ is the transfer of deposits to the Bank from the chartered banks, which effectively drains the supply of available cash balances from the banking system.

A

Drawdown

43
Q

Drawdowns cause interest rates to _______

A

Increase

44
Q

A _____ is a transfer of funds from the Bank to the chartered banks. This increase in deposits and reserves increases the money supply.

A

Redeposits

45
Q

Redeposits cause interest rates to ________

A

Decrease

46
Q

In economics, there are delays between recognizing an economic problem, deciding what policy action to take to solve the problem, implementing the policy, and ultimately seeing the benefit of the policy in action. These _________ make monetary policy decisions more difficult and policy actions less effective.

A

Timing Lags

47
Q

Politicians typically work towards re-election, which creates what is known as a political business cycle. While campaigning, they may advocate lowering taxes or spending on programs and infrastructure in their own riding. However, once they are elected, the national economic reality may call for lower spending. This challenge is called _______

A

Political Considerations

48
Q

Expectations can cause a policy initiative to fail. For example, the gov’t may announce that it will cut personal tax rates to stimulate the economy. However, if the consensus is that the gov’t is doing so only because it is near the end of its mandate, or if the tax cut is widely expected to be soon reversed, consumers may see it as a short-term action. Therefore, consumers my choose to save the tax cut, instead of increase spending, and the policy initiative fails. This challenge is called _______

A

Future Expectations

49
Q

Canada is a large country, with diverse populations and needs. For policy initiatives to work, they must be implemented nationally. However, not all of Canada may need the same intervention. This challenge is called _______

A

Coordination of federal, provincial, and municipal policies

50
Q

Several years of deficits can reduce the gov’ts flexibility with the respect to spending. The higher the gov’t debt, the higher the interest payments that must be made. A gov’ts plan to lower spending to fight inflation may fail if the interest payments are very high. This challenge is called _______

A

High Federal Debt

51
Q

The economic performance of our major trading partners can have a significant impact on our economy This challenge is called _______

A

The impact of international economies

52
Q

A government’s _________ influences economic activity, employment levels, and sustained long-term growth.

A

Fiscal Policy

Canadian Securities (14 decks)

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