Chapitre 15

Question 0

Velocity of circulation

Answer 0

The number of times, on average, that a unit of money is spent per year

Question 1

Quantity theory of money

Answer 1

The theory that states that changes in the price level are due to changes in the quantity of money

Question 2

Equation of exchange

Answer 2

An expression that equates the product of the quantity of money and the velocity of circulation (MV) with the product of the price level and real output (PQ)

Question 3

Monetarism

Answer 3

The school of thought that claims that changes in the money supply are the major causes of economic fluctuations and that macroeconomic stability can be achieved by a steady increase in the money supply

Question 4

Transactions demand for money

Answer 4

The desire to hold money for transaction purposes

Question 5

Precautionary demand for money

Answer 5

The desire to hold money for unexpected contingencies

Question 6

Speculative demand for money

Answer 6

The desire to hold money in anticipation of movements in the prices of financial assets

Question 7

Liquidity preference

Answer 7

The desire to hold money rather than less liquid interest-earning assets

Question 8

Liquidity preference curve

Answer 8

The curve showing the inverse relationship between the quantity of money demanded and the rate of interest

Question 9

Money supply

Answer 9

The total quantity of money supplied at various rates of interest

Question 10

Monetary policy

Answer 10

The manipulation of the money supply and interest rates by the central bank to achieve economic objectives

Question 11

Open market operations

Answer 11

The buying and selling of securities (bonds) by the central bank

Question 12

Bank rate

Answer 12

The rate of interest that the central bank charges on loans and advanced to members of the Canadian Payments Association

Question 13

Redeposit or deposit switching

Answer 13

The act of transferring government funds from the central bank to the commercial banks

Question 14

Drawdown

Answer 14

A transfers of government funds from the commercial banks to the central bank

Question 15

Moral suasion

Answer 15

Any persuasive tactic used by the central bank to secure the cooperation of the commercial banks

Question 16

Key policy rate

Answer 16

Also the key interest rate or the target for the overnight rate, which is the interest rate at which major financial institutions borrow and lend one-day funds among themselves

Question 17

Overnight rate

Answer 17

The target interest rate or key policy rate set by the Bank of Canada for borrowing and lending among major financial institutions

Question 18

Transmission mechanism

Answer 18

The process by which changes i the Bank’s target interest rate or key policy rate affect the economy

Question 19

Liquidity trap

Answer 19

A situation in which the rate of interest is so low that people prefer to hold large amounts of money over other forms of liquid assets